In the audit of Worldwide Wholesale Inc., you performed extensive

In the audit of Worldwide Wholesale Inc., you performed extensive ratio and trend analyses. No material exceptions were discovered except for the following:
1. Commission expense as a percentage of sales had stayed constant for several years but has increased significantly in the current year. Commission rates have not changed.
2. The rate of inventory turnover has steadily decreased for four years.
3. Inventory as a percentage of current assets has steadily increased for four years.
4. The number of days' sales in accounts receivable has steadily increased for three years.
5. Allowance for uncollectable accounts as a percentage of accounts receivable has steadily decreased for three years.
6. The absolute amounts of amortization expense and amortization expense as a percentage of gross fixed assets are significantly smaller than in the preceding year.
REQUIRED
a. Evaluate the potential significance of each of the exceptions above for the fair presentation of financial statements.
b. State the follow-up procedures you would use to determine the possibility of material misstatements.
c. What do these changes indicate about the overall financial position of Worldwide Wholesale Inc.?
Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...

Members

  • Access to 1 Million+ Textbook solutions
  • Ask any question from 24/7 available
    Tutors
$9.99
VIEW SOLUTION
OR

Non-Members

Get help from Auditing Tutors
Ask questions directly from Qualified Online Auditing Tutors .
Best for online homework instance.