The Northwoods Manufacturing Company has automated its production facilities dramatically during the last five years, to the extent that the number of direct-labor hours has remained steady, while production has increased fivefold. Automated equipment, such as robots, has helped increase productivity. Overhead, previously applied at the rate of $7.50 per direct-labor hour, is now being applied at the rate of $23.50 per direct-labor hour. Explain how an auditor might evaluate the reasonableness of the application of factory overhead to year-end inventory and cost of goods sold.
Answer to relevant QuestionsThe auditor is always concerned whether slow-moving or potentially obsolete inventory is included in inventory, and whether inventory should be reduced to a lower market value. Identify five substantive audit procedures the ...Paul Mincin, CPA, is the auditor of Raleigh Corporation. Mincin is considering the audit work to be performed in the accounts payable area for the current-year engagement. The prior-year documentation shows that confirmation ...Refer to Exhibit and access the SEC filings for each of the most recent three years for the following companies: (a) Kohl's, (b) Williams Sonoma, and (c) Dollar General.a. Calculate the following ratios from Exhibit for each ...Refer to the Auditing in Practice feature "The Importance of Professional Skepticism in Testing the Valuation of Inventory: The PCAOB Disciplines Ibarra." Go to the PCAOB Web site and download Enforcement Release No. ...A 2010 study on fraudulent financial reporting by COSO notes ways in which long-lived assets can be fraudulently overstated, including:● Fictitious assets on the books (WorldCom)● Improper and incomplete depreciation ...
Post your question