Part I: Planning Analytical Procedures

1. Step 1: Identify Suitable Analytical Procedures. Your audit senior has suggested that you should use the following ratios (on an overall financial statement level) for planning analytical procedures in the revenue cycle at PharmaCorp:

• Gross margin: (revenues-cost of sales)/revenues
• Turnover of receivables: (revenues/average accounts receivable); for ease of computation simply use ending accounts receivable
• Receivables as a percentage of current assets and as a percentage of total assets: (accounts receivable/total current assets) and (accounts receivable/total assets)
• Allowance for uncollectible accounts as a percentage of accounts receivable: (allowance/accounts receivable)