You are the auditor on the audit for the year ended 30 June 2022 of ABC Pty Ltd, a distributor of women’s clothing. You have performed analytical procedures and compared the results to last year’s audited financial information. The ratios are shown below.

	2022	2021
Current ratio	1.93	1.46
Quick ratio	0.82	0.81
Debt/Equity ratio	0.52	0.44
Inventory turnover ratio	9.2	13.6
Receivable turnover ratio	6.8	9.6

Required:

(1) In relation to inventory, discuss the potential risk of material misstatement, provide the key assertion at risk and justify your answer.

(2) In relation to accounts receivable, discuss the potential risk of material misstatement, provide the key assertion at risk and justify your answer.

 

Answer rating: 100% (QA)

1 In relation to inventory discuss the potential risk of material misstatement provide the key assertion at risk and justify your answer There is a po... View the full answer