Name(s):______________________________________________________________________ In-Class Exercise 13 Leslie Fay, Management Assertions & Audit Evidence, Analytical Procedures – Part II You may complete this exercise by yourself or with up to two other students: i.e., by yourself or in groups of two or three students. Please respond to the questions below succinctly and coherently – think about it or talk it over before you write it down. Please try to write legibly. Ratios, industry average, common-sized financial statements, and equations are presented below. Industry averagesIn comparing Leslie Fay’s 1991 financial ratios with the industry norms, thereare not many significant differences. Liquidity ratios were stronger than the industry average, while their solvency ratios were generally a little weaker. Profitability margins are generally in line with industry averages. The key differences between Leslie Fay and the industry norms is in inventory and receivables. Both sets of ratios were far “worse” than the industry; inventory is 57% “older” and receivables are 22% “older” than the industry.1. What do the ratios presented above tell us about a company in general (discuss liquidity, solvency, profitability, and turnover)? 2. Do any of Leslie Fay’s ratios discussed above concern you, as an auditor? Please elaborate. 1
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