Consider an audit client that manufactures fishing boats and sells them all over the country to dealers who finance their purchases with their banks. The banks usually pay your client within two weeks of shipment. The company’s profits have been increasing over the past several years. To perform planning analytical procedures, you have obtained the following information related to your audit of FYE 2024 ($ in millions):

a. Assume that you had expected that your client’s performance would be similar to that of the client’s major competitor. Based on these expectations, identify potential risk areas and explain why they represent potential risks. 

b. Suggest possible explanations for any unexpected results. 

c. What inquiries and follow-up audit procedures would you perform to determine the accuracy of the client’s data? 

d. As part of the brainstorming session, be prepared to discuss how the CFO might use accounts receivable and inventory to conceal the embezzlement of cash. 

e. Discuss the importance of professional skepticism when performing planning analytical procedures.  

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Accounts receivable Inventory Accounts payable Sales Gross profit (%) Number of days' sales in receivables Number of days' sales in ending inventory 2024** 6.8 16.0 3.1 84.7 19 29 69 2023* 3.3 10.0 2.6 77.9 17 16 47 2022* 2.3 7.2 1.9 56.8 18 15 46 2021* 1.8 5.5 1.5 43.6 17 16 46 2020* 1.7 5.1 1.4 39.8 18 16 47 Major Competitor (2024) 4.2 13.9 3.2 110.3 21 14 46