Chapter 4, Problem 67EP Bookmarked Show all steps: ON Analyzing Profit Margins Using IDEA. For this exercise, your client, Bright IDEAs Inc., has provided you with a listing of inventory as of year end, which includes current selling prices. To test whether profit margins appear adequate to justify the inventory valuation provision, the auditor must complete a series of related steps: 1. Import the client's database of inventory on hand (pp. 187-200 of the IDEA Workbook). You may have already completed this step in Chapter 3 or Ex 69. 2. Create an analysis of selling price changes (pp. 220225 of the IDEA Workbook). 3. Create an analysis of profit margins (pp. 226228 of the IDEA Workbook). Required Data available on McGraw-Hill Connect Inventory 2015.asc Required: Complete the preceding steps and answer the following questions: a. What percentage of inventory items have price movements in excess of 50%? How many of these items experienced price increases? How many experienced price decreases? Which direction of change would be most concerning to the auditor? b. What percentage of items have negative profit margins? c. What effects would the findings in part (a) and (b) have on the auditor's assessment of the risk of material misstatement? What accounts and assertions are most likely influenced by these findings? Source: C1202 IDEA Data Analysis Workbook: IDEA Version Ten. 2016. CaseWare IDEA, Inc. Chapter 4, Problem 67EP Bookmarked Show all steps: ON Analyzing Profit Margins Using IDEA. For this exercise, your client, Bright IDEAs Inc., has provided you with a listing of inventory as of year end, which includes current selling prices. To test whether profit margins appear adequate to justify the inventory valuation provision, the auditor must complete a series of related steps: 1. Import the client's database of inventory on hand (pp. 187-200 of the IDEA Workbook). You may have already completed this step in Chapter 3 or Ex 69. 2. Create an analysis of selling price changes (pp. 220225 of the IDEA Workbook). 3. Create an analysis of profit margins (pp. 226228 of the IDEA Workbook). Required Data available on McGraw-Hill Connect Inventory 2015.asc Required: Complete the preceding steps and answer the following questions: a. What percentage of inventory items have price movements in excess of 50%? How many of these items experienced price increases? How many experienced price decreases? Which direction of change would be most concerning to the auditor? b. What percentage of items have negative profit margins? c. What effects would the findings in part (a) and (b) have on the auditor's assessment of the risk of material misstatement? What accounts and assertions are most likely influenced by these findings? Source: C1202 IDEA Data Analysis Workbook: IDEA Version Ten. 2016. CaseWare IDEA, Inc