You are the audit senior on the audit of Freezair, a medium sized manufacturer of large...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You are the audit senior on the audit of Freezair, a medium sized manufacturer of large freezers. This is the first year your firm has performed the audit. As part of the planning work, you have performed analytical procedures on an annualized basis and compared the results to industry averages and last year's audited financial information. The results are given below: Ratio Freezair Current ratio Days in receivable Inventory turnover ratio Debt to equity ratio Gross margin 2020 1.30 83 3.0 46% 45% 2019 2.10 65 4.2 35% 33% 2018 2.30 60 5.2 30% 40% 2017 2.50 57 5.2 28% 40% Industry Average 2020 2.50 61 5.0 28% 40% Required: (a) Identify business risks related to Freezair's operations (b) Discuss the conclusions that you can draw from the above ratios about Freezair's financial position. (c) Identify potential audit risks to be investigated further in light of the ratios. You are the audit senior on the audit of Freezair, a medium sized manufacturer of large freezers. This is the first year your firm has performed the audit. As part of the planning work, you have performed analytical procedures on an annualized basis and compared the results to industry averages and last year's audited financial information. The results are given below: Ratio Freezair Current ratio Days in receivable Inventory turnover ratio Debt to equity ratio Gross margin 2020 1.30 83 3.0 46% 45% 2019 2.10 65 4.2 35% 33% 2018 2.30 60 5.2 30% 40% 2017 2.50 57 5.2 28% 40% Industry Average 2020 2.50 61 5.0 28% 40% Required: (a) Identify business risks related to Freezair's operations (b) Discuss the conclusions that you can draw from the above ratios about Freezair's financial position. (c) Identify potential audit risks to be investigated further in light of the ratios.
Expert Answer:
Answer rating: 100% (QA)
Answers a Business risk related to this situation is financial risk Financial risk refers the risk relating to the handling of the finance Eg the busi... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
You are the audit senior on the audit of Great Eastern Hotel (GEH). This two-star hotel is located in a major coastal city and as such is prone to seasonal fluctuations. The 200 room hotel is open...
-
You are the audit senior on the audit of Great Eastern Hotel (GEH). This two-star hotel is located in a major coastal city and as such is prone to seasonal fluctuations. The 200-room hotel is open...
-
You are the audit senior on the audit of Harmony Pty Ltd, a large manufacturing company, for the year ended 30 June 2020. It is now 25 August, 2020 and you are reviewing the audit working papers...
-
Find the lengths of the curves. The curve r = a sin 2 (/2), 0 , a > 0
-
Zhu Manufacturing is considering the introduction of a family of new products. Long- term demand for the product group is somewhat predictable, so the manufacturer must be concerned with the risk of...
-
Air at 300 K and 100 kPa steadily flows into a hair dryer having electrical work input of 1500 W. Because of the size of the air intake, the inlet velocity of the air is negligible. The air...
-
Worldview Magazine, Inc., issued \(\$ 700,000\) of 15 -year, \(81 / 2 \%\) convertible bonds payable on July 31,2006 , at a price of 98 . Each \(\$ 1,000\) maturity amount of the bonds is convertible...
-
The following profit payoff table was presented in Problem 1: The probabilities for the states of nature are P(s1) = 0.65, P(s2) = 0.15, and P(s3) = 0.20. a. What is the optimal decision strategy if...
-
22. Indicate whether the following actions would (+) increase, (-) decrease, or (0) not affect a company's total assets, liabilities, and stockholders' equity. (12 points) Stockholders' Assets...
-
Consider the following string of page references 7, 0, 1, 2, 0, 3, 0, 4, 2, 3, 0, 3, 2. Complete a figure similar to Figure 8.14, showing the frame allocation for: a. FIFO (first-in-first-out) b. LRU...
-
I. One dimensional motion with constant acceleration A. A small cart is given a strong push up on an incline plane. We are concerned only with its motion along the plane. a. On the figure below, draw...
-
How do organizational structures and hierarchies affect communication flow and decision-making processes within an organization ?
-
Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 25% each of the last three...
-
Describe the role of spliceosomes in pre-mRNA processing, and how alterations in spliceosome components can lead to splicing-related diseases .
-
What are the key drivers of organizational change and how can leaders effectively manage resistance to change ?
-
Find the derivative of f(x)=-6x10 +9x4. f'(x) =
-
Identify the two identities that are correctly matched with the description. Sexual identity - I am a female National identity - I am Namibian Gender identity - I am gay Cyber identity - I am a...
-
What kind of financial pressures can an LBO cause?
-
Why are audit tests more likely to be conducted at or after year end for high-risk clients than for low-risk clients? Explain.
-
Harlan Venture Inc. (HV) operates a restaurant named Harlan's, which is located in Toronto. The shareholder, Taufiq Noorani, is concerned whether the system and controls in place at the restaurant...
-
Fellowes and Associates Chartered Accountants is a successful mid-tier accounting firm with a large range of clients across Canada. During the financial year 2011, Fellowes and Associates gained a...
-
When the temperature of an ideal gas is increased from \(27^{\circ} \mathrm{C}\) to \(927{ }^{\circ} \mathrm{C}\), the kinetic energy will be (a) Same (b) Twice (c) Eight times (d) Four times
-
\(n_{1}\) moles of an ideal monoatomic gas at temperature \(T_{1}\) and pressure \(P\) are in one compartment of an, insulated container. In an adjoining compartment, separated by an insulating...
-
Compressibility factor for a given vapour or gas can be represented by (a) \(Z=1+B^{\prime} P+C^{\prime} P^{2}+D^{\prime} P^{3}+\cdots\) (b) \(Z=1+\frac{B}{V}+\frac{C}{V^{2}}+\frac{D}{V^{3}}+\cdots\)...
Study smarter with the SolutionInn App