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Required: Compare The Home Improvement Store's ratios with those of its indu and extent of audi to Advanced Module 2 in this chapter for more information regarding the ratios used in the analytical procedure. For each ratio provided in the table above: a Indicate the potential risks the ratio and/or historical patterns may present. labelled ' Reserve b Indicate one or two plausible explanations for why The Home Improvement Store's ratios or licy: 'At the time historical patterns differ from those of the industry. ted merchandise rns for sales that ear: The entity has Discussion Cases 5-27 (103,4,5) Part 1. Lernout & Hauspie (L & H) was the world's leading provider of speech and language technology products, solutions and services to businesses and individuals worldwide. Both Microsoft and Intel invested millions in L & H. However, accounting scandals and Return Rate fraud allegations sent the company's stock crashing, and forced the firm to seek bankruptcy 104 protection in Belgium and the USA. The following selected information pertains to L & H's sales 06 and accounts receivable: . Consolidated revenue increased 184 per cent from the 1997 fiscal year to the 1998 fiscal year. O . Revenue in South Korea, which has a reputation as a difficult market for foreign companies to enter, increased from $97,000 in the first quarter of 1999 to approximately $59 million in the first quarter of 2000. . In the second quarter of 2000, sales grew by 104 per cent but accounts receivable grew by 128 per cent. . Average days outstanding increased from 138 days in 1998 to 160 days for the six-month period ended 30 June 2000. count. Required: do not a Based on the above information, which assertion(s) for sales should the auditor be most concerned with? Why? b Based on the above information, which assertion(s) for accounts receivable should the auditor able be most concerned with? Why? c What audit evidence should the auditor gather to verify the assertion(s) for sales and accounts receivable? Be specific as to how each type of evidence relates to the assertions you mentioned in parts a and b of this question.CHAPTER 5 Evidence and Documentation 170 Part II. L & H's auditor did not confirm accounts receivable from customers in South Korea However, the Wall Street Journal contacted 18 of L & H's South Korean customers and learns the following: . Three out of 18 customers listed by L & H stated that they were not L & H customers. . Three others indicated that their purchases from L & H were smaller than those reported by L & H. Required: a IfL & H's auditor had confirmed these receivables and received such responses, what additional evidence could they have gathered to try to obtain an accurate figure for sales to and accounts receivable from customers in South Korea? b If you were L & H's auditor and you had received such responses from South Korean customers, how likely would you be to use inquiry of the entity's personnel as an audit procedure? Why? 5-28 (LO9) The auditors for City Football Club are conducting their audit for the fiscal year ended 31 December 2013. Specifically, the audit firm is now focusing on the audit of revenue from home football games in the national league from October to December 2013. While planning the audit of sales of football tickets, one of their newer members of staff observed that, in prior years, many hours were spent auditing revenue. This staff member pointed out that perhaps the firm could apply analytical procedures to evaluate whether it appears that the revenue account is properly stated. The staff associate noted that information for a typical home game could be used to estimate revenues for the relevant period. October to December consisted of seven home games - one against the league's most merited team, Athletic, and six games against other opponents. One d during
