One of your audit clients manufactures fishing boats and sells them all over the country. Boats are sold to dealers who finance their purchases on a floor-plan basis with their banks. The dealer’s banks usually pay your client within two weeks of shipment. The company’s profits have been increasing over the past several years. You have obtained the following information related to your 2007 audit ($ in millions):

a. Calculate the following ratios for each year and the competitor:
(i) Gross margin as a percent of sales.
(ii) Inventory turnover.
b. Suggest possible explanations for any unexpected results.
c. What inquiries and follow-up audit procedures might be performed to determine the accuracy of the client’sdata?

  • CreatedDecember 29, 2012
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