One of your audit clients manufactures fishing boats and sells them all over the country. Boats are sold to dealers who finance their purchases on a floor-plan basis with their banks. The dealer€™s banks usually pay your client within two weeks of shipment. The company€™s profits have been increasing over the past several years. You have obtained the following information related to your 2007 audit ($ in millions):

Required
a. Calculate the following ratios for each year and the competitor:
(i) Gross margin as a percent of sales.
(ii) Inventory turnover.
b. Suggest possible explanations for any unexpected results.
c. What inquiries and follow-up audit procedures might be performed to determine the accuracy of the client€™sdata?

Transcribed Image Text:

Inventory Sales Cost of Goods Sold 65.9 64.7 46.6 36.2 32.6 2007 2006 2005* 2004 2003 Major Competitor (2007) 16.0 10.0 7.25.55.1 84.7 77.9 56.8 43.6 39.8 13.9 110.3 92.0