Leslie Fay Case

Topics: Balance sheet, Generally Accepted Accounting Principles, Accounts receivable Pages: 2 (1026 words) Published: October 30, 2014

ACCT 497
Writing assignment 1
Siqi Wang
The Leslie Fay Companies
Analytical Procedures Report
Executive Summary
After reviewing the Financial Report from The Leslie Fay Companies from 1987 to 1991, I made ratios of Balance Sheet and Income Statement to start with audit planning, which could help us make comparison directly. Also, the calculation of ratios in liquidity, activity, profitability and solvency contains in my report. The purpose of analytical procedures is to detect “red flags” within the financial and non-financial information. For the financial part, firstly, I made year-to-year comparisons from 1987 to 1991; then, I did going concern analysis that to compare the data from The Laslie Fay Co. with the industry standard in 1991. What’s more, I consider the predicable relationships such as gross profit to sales. For the non-financial part, I analysis the economic environment during the period and big events took place in Leslie Fay Co. from 1987 to 1991. To end up with the analytical procedures, I make conclusions and provide my recommendations. The Analysis of Financial Information

Year-to-Year Comparison
First of all, the Account Receivables was increasing 4.7% (56.6 million) from 1987 amounted 82.9 million (27.1%) to 1990 amounted 139.5 million (31.8%). However, one thing is worth to mention that there was a substantial loss when Leslie Fay wrote off a receivable from Allied/Federated Department Stores after the large retailer filed bankruptcy in late 1989. As far as I can see, it is an unusual and inconsistence gain of Account Receivables in 1987 to 1990. More specifically, especially from 1989 to 1990, the Account Receivable increased from 117.3 million (30.3%) to 139.5 million (31.8%), which is a 1.5% (22.2 million) increase in one year after the large retailer announced bankruptcy and there was a large uncollectable amount from the large retailer. As a result, I suspect Leslie Fay was trying to overstate its Account Receivable...
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