In October 2025, MSI installed a new cloud-based inventory costing system to replace a system that...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
In October 2025, MSI installed a new cloud-based inventory costing system to replace a system that had been developed in-house. The old system could no longer keep up with the complex and detailed manufacturing costing process that provides information to support competitive bidding. MSI's IT department, together with consultants from the software company, implemented the new inventory costing system, which went live on December 1, 2025. Key operational staff and the internal audit team from MSI were significantly engaged in the selection, testing, training, and implementation stages. MSI's fiscal year-end is June 30. The following table shows financial information for the first two quarters of the fiscal year-end June 30, 2026 (amounts in millions). Note that the financial data listed are for the three-month quarter ended (i.e., the second quarter does not include the first-quarter data). Item 1st Quarter 2nd Quarter Total assets $96.0 $92.0 Total revenues 33.0 31.0 Pretax income 3.2 2.8 The pretax income for the first two quarters is reasonable, with a net profit margin falling between 8 and 10% of sales. Based on prior years, pretax income for the third quarter usually holds steady relative to the second quarter, but pretax income for the fourth quarter typically decreases by 20% over the third quarter as governments reach the end of their spending budgets. Gather information: Considering both industry and entity factors, what are the major inherent risks in the MSI audit? In October 2025, MSI installed a new cloud-based inventory costing system to replace a system that had been developed in-house. The old system could no longer keep up with the complex and detailed manufacturing costing process that provides information to support competitive bidding. MSI's IT department, together with consultants from the software company, implemented the new inventory costing system, which went live on December 1, 2025. Key operational staff and the internal audit team from MSI were significantly engaged in the selection, testing, training, and implementation stages. MSI's fiscal year-end is June 30. The following table shows financial information for the first two quarters of the fiscal year-end June 30, 2026 (amounts in millions). Note that the financial data listed are for the three-month quarter ended (i.e., the second quarter does not include the first-quarter data). Item 1st Quarter 2nd Quarter Total assets $96.0 $92.0 Total revenues 33.0 31.0 Pretax income 3.2 2.8 The pretax income for the first two quarters is reasonable, with a net profit margin falling between 8 and 10% of sales. Based on prior years, pretax income for the third quarter usually holds steady relative to the second quarter, but pretax income for the fourth quarter typically decreases by 20% over the third quarter as governments reach the end of their spending budgets. Gather information: Considering both industry and entity factors, what are the major inherent risks in the MSI audit?
Expert Answer:
Answer rating: 100% (QA)
Based on the information provided the major inherent risks in the audit of MSI can include the following 1 Implementation of a new inventory costing s... View the full answer
Related Book For
Auditing A Practical Approach with Data Analytics
ISBN: 978-1119401742
1st edition
Authors: Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton
Posted Date:
Students also viewed these accounting questions
-
Determine Q if the S-R FF is driven with the following signals. Initial state: HIGH (C is the enable/control input). S 23 R s
-
Analysis and evaluation: Discuss the factors to consider when determining planning materiality for MSI. Calculate an amount for planning materiality for the audit of fiscal year-end June 30, 2023....
-
Determine the equations for the voltage and instantaneous Power in the network in Figure P 9.2 4 2225 A Figure P 92
-
What is the significance of having stock qualify as Section 1244 stock?
-
During January the following purchase transactions occurred: 8-Jan Purchased $5,900 of merchandise from The Chocolate Shop. Terms 2/15, n/45, FOB shipping point. The Candy Store prepaid...
-
Water flows through the orifice meter shown in Fig. P8.122 at a rate of \(0.10 \mathrm{cfs}\). If \(d=0.1 \mathrm{ft}\), determine the value of \(h\) and the pressure difference associated with this...
-
The Metropolitan Book Company purchases paper from the Atlantic Paper Company. Metropolitan produces magazines and paperbacks that require 1,215,000 pounds of paper per year. The cost per order for...
-
Gold coast organics has a total assets turnover of 2.5 and a net profit margin of 3.5 percent.the total debt ratio for the firm is 50 percent.calculate the gold coast organics return On equity.
-
Consider a class DrinkMachine that models a vending machine. We will assume it only sells one type of drink. It is constructed with a maximum capacity (number of drinks it can hold). There is a...
-
A basketball player is running at 5.40 m/s directly toward the basket when he jumps into the air to dunk the ball. He maintains his horizontal velocity. (a)What vertical velocity (in m/s) does he...
-
Build a spreadsheet that identifies the breakeven unit production based on the following: A small bicycle factory is building their first series of mountain bikes. They build the frame from scratch...
-
Suppose that an individual stock's return is normally distributed with a mean of 9.3% and a standard deviation of 4.4%. Suppose that all stocks had the same distribution of returns. What return must...
-
Identify the components (determinants) and the symbols associated with each characteristic. Characteristic This is the rate on short-term U.S. Treasury securities, assuming there is no inflation. It...
-
QUESTION 1 (5 MARKS) b) a) There are two separate spheres; a negatively charged sphere and a neutral sphere as shown in Figure 1 (a). Then, a metal bar is used to connect both spheres as shown in...
-
What level of security and privacy, we need to reach in the micro-blogging? Why improving security and privacy is important in the micro-blogging? How to improve the security and privacy in the...
-
Find the numerical value of each expression. (a) sech 0 (b) cosh -1 1
-
What would be the most effective option to increase employee motivation to stay and reduce the driver turnover rate? Why do you believe this option will be effective?
-
How else might the manager have handled the situation to prevent potential issues, including a negative impact on the teams performance?
-
In what ways do you believe providing special work arrangements or accommodations for employees impacts employee motivation? How does it help? How does it hurt?
Study smarter with the SolutionInn App