Audit Reports and Analytical Procedures of Uden Supply Company

Topics: Revenue, Generally Accepted Accounting Principles, Financial audit Pages: 6 (530 words) Published: October 28, 2014

You can find the work ACC 410 Week 1 Discussion Question 2 Audit Reports with the Analytical Procedures explanations and UDEN SUPPLY COMPANY Comparative Income Statement table in this file.
Business - Accounting
Analytical Procedures

In a 2-3 page paper, complete the case below and submit to instructor. Review the income statement for Uden Supply Company and answer the following:

Describe the purpose of analytical procedures performed in the planning stage of the audit.

Uden Supply has projected its 2004 gross profit at 31% of sales despite expectation for some shrinkage in margins. On the basis of Uden's operating performance in years 2001 - 2003 project your best guess for 2004. Project 2004 based on the incremental changes for each line item over the last three years. Uden’s unaudited financial statements for the current year show a 31 percent gross profit rate. Assuming that this represents a misstatement from the amount that you developed as an expectation, calculate the estimated effect of this misstatement on net income before taxes for 20X4. Indicate whether you belive that the difference calculated in part (c) is material. Explain your answer. (50-100 words).

Comparative income statement information for Uden Supply Company is presented in the accompanying table.

UDEN SUPPLY COMPANY

Comparative Income Statement

Years Ended December 20X1, 20X2, and 20X3

(Thousands)

 

 

20X1 Audited

20X2 Audited

20X3 Audited

20X4 Expected

Sales

8,700

9,400

10,100

 

Cost of goods sold

6,000

6,500

7,000

 

  Gross profit

2,700

2,900

3,100

 

...

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Make sure that you register for classes the minute that you are allowed to. If you wait to register, there is a good chance that you will not get the classes, teachers and times that you desire. This can leave you in a very undesirable situation where you will be faced with a difficult schedule. Business - Accounting

Analytical Procedures

In a 2-3 page paper, complete the case below and submit to instructor. Review the income statement for Uden Supply Company and answer the following:

Describe the purpose of analytical procedures performed in the planning stage of the audit.

Uden Supply has projected its 2004 gross profit at 31% of sales despite expectation for some shrinkage in margins. On the basis of Uden's operating performance in years 2001 - 2003 project your best guess for 2004. Project 2004 based on the incremental changes for each line item over the last three years. Uden’s unaudited financial statements for the current year show a 31 percent gross profit rate. Assuming that this represents a misstatement from the amount that you developed as an expectation, calculate the estimated effect of this misstatement on net income before taxes for 20X4. Indicate whether you belive that the difference calculated in part (c) is material. Explain your answer. (50-100 words).

Comparative income statement information for Uden Supply Company is presented in the accompanying table.

UDEN SUPPLY COMPANY

Comparative Income Statement

Years Ended December 20X1, 20X2, and 20X3

(Thousands)

 

 

20X1 Audited

20X2 Audited

20X3 Audited

20X4 Expected

Sales

8,700

9,400

10,100

 

Cost of goods sold

6,000

6,500

7,000

 

  Gross profit

2,700

2,900

3,100

 

 

 ...
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