10-32 (Components of Internal Control)
8-16 (Analytical procedures) In audit planning the audit of Circuits Technology, Inc. (CTI). CTI resells, installs, and provides computer networking products (client software, gateway hardware and software, and twinax hardware) to other businesses. Figure 8-14 provides some summary information from CTI’s financial statements.
Required
a. Calculate purchases, gross margin, inventory turn days, accounts receivable turn days, and accounts payable turn days for the years ended 20x2, 20x3, 20x4, 20x5.
Purchases
2002 =
2003 =
2004 =
2005 =
Gross margin%
2002 =
2003 =
2004 =
2005 =
Inventory Turn-over days
2002 =
2003 =
2004 =
2005 =
Accounts Receivable Turn-over Days
2002 = 86.43
2003 = 88.51
2004 = 87.30
2005 = 76.83
Accounts Payable Turn-over Days
2002 =
2003 =
2004 =
2005 =
b. Describe the trends identified by performing analytical procedures in the gross operating cycle, the net operating cycle, and gross margin.
c. If tolerable misstatement is $45,000 for inventory, develop an expectation range for inventory turn days.
d. With respect to inventory, what might these trends indicate about the potential misstatement in inventory?
10-32 (Components of internal control) Internal controls can be categorized using the following framework.
1. Control environment
2. Risk assessment
3. Information and communication
4. Control activities
4.1. Authorization
4.2. Segregation of duties
4.3. Information processing controls
4.3.1. Computer general controls
4.3.2. Computer application controls
4.3.3. Controls over the financial reporting process
4.4. Physical controls
4.5. Performance reviews
4.6. Controls over management discretion in financial reporting
5. Monitoring
6. Antifraud programs and controls
Required-Part A
Indicate the category of internal control applicable to each procedure using the framework above. Enter ONLY the number associated with the category of internal control.
a. 1
b. 4.6
c.
Required
a. Calculate purchases, gross margin, inventory turn days, accounts receivable turn days, and accounts payable turn days for the years ended 20x2, 20x3, 20x4, 20x5.
Purchases
2002 =
2003 =
2004 =
2005 =
Gross margin%
2002 =
2003 =
2004 =
2005 =
Inventory Turn-over days
2002 =
2003 =
2004 =
2005 =
Accounts Receivable Turn-over Days
2002 = 86.43
2003 = 88.51
2004 = 87.30
2005 = 76.83
Accounts Payable Turn-over Days
2002 =
2003 =
2004 =
2005 =
b. Describe the trends identified by performing analytical procedures in the gross operating cycle, the net operating cycle, and gross margin.
c. If tolerable misstatement is $45,000 for inventory, develop an expectation range for inventory turn days.
d. With respect to inventory, what might these trends indicate about the potential misstatement in inventory?
10-32 (Components of internal control) Internal controls can be categorized using the following framework.
1. Control environment
2. Risk assessment
3. Information and communication
4. Control activities
4.1. Authorization
4.2. Segregation of duties
4.3. Information processing controls
4.3.1. Computer general controls
4.3.2. Computer application controls
4.3.3. Controls over the financial reporting process
4.4. Physical controls
4.5. Performance reviews
4.6. Controls over management discretion in financial reporting
5. Monitoring
6. Antifraud programs and controls
Required-Part A
Indicate the category of internal control applicable to each procedure using the framework above. Enter ONLY the number associated with the category of internal control.
a. 1
b. 4.6
c.