TT roach Quick Tour Print t Search Annotations Accessibili LO 5 Stainless Steel Specialties (SSS) is a manufacturer of hot water-based heating systems for homes and commercial businesses. The company has grown about 10% in each of the past five years. The company has not made any acquisitions. Following are some statistics for the company: Overview of Operational Data Stainless Steel Specialties (SSS) (Sales and Net Income Reported in $ Millions) 2018 2014 2015 2016 2017 (unaudit Sales $800 $880 $950 $1,050 $1,300 Net $28 $38 $42 $52 $68 income Stock $17 $24 $19 $28 $47 price Economic 1.00 1.04 1.09 1.13 1,14 growth in areas served (index with 1.00 for 20 x 1) Percent of 8.9 9.4 9.6 10.8 14.0 heating market by SSS Accounts $180 $170 $196 $210 $297 receivable Percent of 38 36 40 38 43 sales made in last quarter Gross 28.0 28.3 28.8 29.2 33.6 margin (%) Additional information available to the auditor includes: The company has touted its new and improved technology for the increaseAdditional information available to the auditor includes: The company has touted its new and improved technology for the increase both in sales and in gross margin. The company claims to have decreased administrative expenses, thus increasing net profits. The company has reorganized its sales process to a more centralized approach and has empowered individual sales managers to negotiate better prices to drive sales as long as the amounts are within corporate guidelines. The company has changed its salesperson compensation by increasing the CUIFLmlSSlUIl 011 sales 10 new customers. Sales commissions are no longer affected by returned goods ifthe goods are returned more than 90 days after sale andjor by not collecting the receivables. SSS has justied the changes in sales commissions on the following grounds: The salesperson is not responsible for quality issuesthe main reason that customers return products. The salesperson is not responsible for approving credit; rather credit approval is under the direction of the global sales manager. a. What is the importance of the information about salesperson compensation to the audit of receivables and revenue? Explain how the auditor would use this information in planning analytical procedures. h. Perform planning analytical procedures using the data included in the table and the information about the change in performance. For each year, you will most likely want to focus on the % change of the various statistics over the prior year. Focus on Steps 3, 4, and 5 of the planning analytical procedures process. What are the important insights that the auditor should gain from performing such procedu re s ? c. Why should the auditor be interested in a company's stock price when performing an audit, as stock price is dependent, at least in part, on audited financial reports? (1. What information about 583 might the auditor consider as fraud risk factors? e. Identify specific substantive audit procedures that should be performed as a result of the planning analytical procedures performed by the auditor (Step 6 of the planning analytical procedures process)