Presented below are two sets of financial ratios. The ratios in the first column were computed from
Question:
Presented below are two sets of financial ratios. The ratios in the first column were computed from EAZ Manufacturing's prior-year audited statements. In the second column are ratios computed from the current-year unaudited statements. The difference between the two years' ratios could be the result of normal year-to-year variation and/or an error in the unaudited statements which has a material effect on net income or, if only the balance sheet is affected, is material in relation to total assets or total liabilities. You have no other reason to expect major changes from the prior year's financial relationships. Assume that any financial statement error is caused by a single mistake or multiple occurrences of the same mistake. (There is only one cause.)
For example: The change in the ratios might have resulted from next period's credit sales recorded in the current period.
Required:
List all the possible errors that you can think of that may have caused the changes in the ratios.
Step by Step Answer:
Auditing An Assertions Approach
ISBN: 9780471134213
7th Edition
Authors: G. William Glezen, Donald H. Taylor