A 174 AUDITING CONCEPTS AND METHODS Sales Cost of sales Gross profit. Selling and administrative expenses:...

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A 174 AUDITING CONCEPTS AND METHODS Sales Cost of sales Gross profit. Selling and administrative expenses: Advertising and promotion Bad debts Depreciation Insurance Fannin Ltd. INCOME STATEMENTS for Years Ended June 30 19X3 19X2. 19X1 $2,100,000 $1,800,000 $1,700,000 1,320,000 $380,000 1,690,000 1,380,000 $ 420,000 $ 410,000 Salaries Sundry Utilities and telephone Operating income Other expense (income): Interest and bank charges Profit on sale of land Cash discounts and sundry Income before tax Income taxes: Current Deferred Net income for the year Dividends pald $ 117,000 10,000 10,000 7,000 182,000 28,000 26,000 $ 380,000 $ 30,000 $ 77,000 7,000 15,000 7,000 160,000 12,000 22,000 $ 300,000 $ 120,000 $ $ $ 25,000 $ $ 63,000 $ 41,000 $ 38,000 (80,000) (1,000) (3,000) (4,000) $ (18,000) $ 38,000 $ 34,000 48,000 $ 82,000 86,000 (7,000) $ 26,000 55,000 56,000 25,000 51,000 6,000 15,000 7,000 150,000 11,000 20,000 $ 260,000 $ 120,000 $ (10,000) $ 21,000 $ 3,000 5,000 20,000 8,000 $ 28,000 $ $ 58,000 25,000 Selain Produc Sales Cost of Ma Lat OVE Sta De Gross Produc Sales Cost of Ma Lat Ov Sta De Gross Total No! Uansfer invento In cific ested analy being use of Cash Accounts receivable: Trade 19X2 and 19X1 figures were those reported in the audited financial statements, but the 19X3 figures were as prepared by the chief accountant prior to the audit.) Raw material (cost) CHAPTER 5: UNDERSTANDING THE CLIENT AND GENERAL PLANNING 173 Employees Income taxes recoverable Land sale Allowance for doubtful accounts Inventories: Finished goods: (standard cost): Product line A Product line B Shop supplies (cost) Fannin Ltd. BALANCE SHEETS as of June 30 19X3 $ 148,000 Total CA Land (cost) Plant and equipment (cost) Accumulated depreciation Bank loan Accounts payable Trade notes payable Income taxes payable Due to shareholder Current portion of mortgage. Common share capital Contributed surplus Retained earnings Page 1 of 2 Total Ch Mortgage (6%) - less current portion Deferred income taxes 387,000 8,000 10,000 130,000 (15,000) 69,000 204,000 166,000 23,000 $1,130,000 $. 150,000 1,600,000 (870,000) 170,000 374,000 97,000 19X2 $ 234,000 263,000 6,000 75,000 $ 716,000 .440,000 71,000 (15,000) 72,000 124,000 156,000 $ 840,000 $ 730,000. 200,000 200,000 1,600,000 (800,000) 1,600,000 (685,000) $ 880,000 $1,000,000 $1,115,000 $2,010,000 $1,840,000 $1,845,000 110,000 304,000 34,000 9,000 12,000 60,000 $ 529,000 500,000 68,000 $1,227,000 $1,097,000 $ 200,000 $ 210,000 50,000 523,000 $783,000 $2,010,000 50,000- 493,000 19X1 $ 210,000 219,000 5,000 $ 743,000 $1,840,000 (15,000) 78,000 84,000 149,000 80,000 241,000 21,000 8,000 100,000 60,000 $ 510,000 -560,000 63,000 $1,133,000 $ 200,000 50,000 462,000 $ 712,000 $1,845,000 > A 174 AUDITING CONCEPTS AND METHODS Sales Cost of sales Gross profit. Selling and administrative expenses: Advertising and promotion Bad debts Depreciation Insurance Fannin Ltd. INCOME STATEMENTS for Years Ended June 30 19X3 19X2. 19X1 $2,100,000 $1,800,000 $1,700,000 1,320,000 $380,000 1,690,000 1,380,000 $ 420,000 $ 410,000 Salaries Sundry Utilities and telephone Operating income Other expense (income): Interest and bank charges Profit on sale of land Cash discounts and sundry Income before tax Income taxes: Current Deferred Net income for the year Dividends pald $ 117,000 10,000 10,000 7,000 182,000 28,000 26,000 $ 380,000 $ 30,000 $ 77,000 7,000 15,000 7,000 160,000 12,000 22,000 $ 300,000 $ 120,000 $ $ $ 25,000 $ $ 63,000 $ 41,000 $ 38,000 (80,000) (1,000) (3,000) (4,000) $ (18,000) $ 38,000 $ 34,000 48,000 $ 82,000 86,000 (7,000) $ 26,000 55,000 56,000 25,000 51,000 6,000 15,000 7,000 150,000 11,000 20,000 $ 260,000 $ 120,000 $ (10,000) $ 21,000 $ 3,000 5,000 20,000 8,000 $ 28,000 $ $ 58,000 25,000 Selain Produc Sales Cost of Ma Lat OVE Sta De Gross Produc Sales Cost of Ma Lat Ov Sta De Gross Total No! Uansfer invento In cific ested analy being use of Cash Accounts receivable: Trade 19X2 and 19X1 figures were those reported in the audited financial statements, but the 19X3 figures were as prepared by the chief accountant prior to the audit.) Raw material (cost) CHAPTER 5: UNDERSTANDING THE CLIENT AND GENERAL PLANNING 173 Employees Income taxes recoverable Land sale Allowance for doubtful accounts Inventories: Finished goods: (standard cost): Product line A Product line B Shop supplies (cost) Fannin Ltd. BALANCE SHEETS as of June 30 19X3 $ 148,000 Total CA Land (cost) Plant and equipment (cost) Accumulated depreciation Bank loan Accounts payable Trade notes payable Income taxes payable Due to shareholder Current portion of mortgage. Common share capital Contributed surplus Retained earnings Page 1 of 2 Total Ch Mortgage (6%) - less current portion Deferred income taxes 387,000 8,000 10,000 130,000 (15,000) 69,000 204,000 166,000 23,000 $1,130,000 $. 150,000 1,600,000 (870,000) 170,000 374,000 97,000 19X2 $ 234,000 263,000 6,000 75,000 $ 716,000 .440,000 71,000 (15,000) 72,000 124,000 156,000 $ 840,000 $ 730,000. 200,000 200,000 1,600,000 (800,000) 1,600,000 (685,000) $ 880,000 $1,000,000 $1,115,000 $2,010,000 $1,840,000 $1,845,000 110,000 304,000 34,000 9,000 12,000 60,000 $ 529,000 500,000 68,000 $1,227,000 $1,097,000 $ 200,000 $ 210,000 50,000 523,000 $783,000 $2,010,000 50,000- 493,000 19X1 $ 210,000 219,000 5,000 $ 743,000 $1,840,000 (15,000) 78,000 84,000 149,000 80,000 241,000 21,000 8,000 100,000 60,000 $ 510,000 -560,000 63,000 $1,133,000 $ 200,000 50,000 462,000 $ 712,000 $1,845,000 >

Answer rating: 100% (QA)

The potential red flags that the auditor needs to look into is 1 The sudden increase in trade rece... View the full answer