You are performing the analytical procedures for the audit of the inventory and warehousing cycle for the Abdullah Printers company, a wholesale distributor of computer printers and other peripheral hardware. Your data is show in the following chart:

	2013	2012	2011
Revenue	$76,476	68,222	56,741
Cost of Goods sold	36,686	33,125	27,804
Beginning inventory	5,977	5,252	4,173
Ending inventory	7,125	5,977	5,252

The gross margin and inventory turnover industry averages are as follows:

	2013	2012	2011
Gross margin%	49%	49%	48%
inventory turnover	5.7	5.8	5.9

Required

a. Calculate the following ratios:1) gross margin as a percentage of sales 2) inventory turnover. (2 marks)

b. What does the gross margin tell the auditor as an analytical tool? List several possible reasons for the changes in this ratio. (3 marks)

c. What does the inventory turnover tell the auditor as an analytical tool? List several possible reasons for the changes in this ratio. (3 marks)

d. What should the auditor do to determine the actual cause of the changes. (2 marks)

Answer rating: 100% (QA)

Part A a Ratios 2013 2012 2011 1 Gross margin Revenue 76476 68222 56741 Less COGS 36686 33125 27804 ... View the full answer