Laramie Wire Manufacturing - 1. The objective of analytical...

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1. The objective of analytical procedures is to identify the existence of unusual transactions and events, and amounts, ratios and trends that might indicate matters that have financial statement and audit planning ramifications. First, the auditors should consider information regarding the industry in which the client operates. In this case, average machine setup time from start to finish is approximately six hours, which is slightly below the industry average. It means the company is efficient in preparation for production. Also, the auditors should compare client data with prior period data. For example, days sales in receivables increased from 48.4 days (2004) to 56.3 days (2005). Though sales didn’t increase a lot, but days sales in receivables increased a lot. There may be customers who are not paying due to defective products they purchased. The auditors need to look at accounts receivable aging report and returns that are not processed timely by reviewing returns. Plus , finished goods , copper rod, and plastic inventories increased as a percent of sales. The auditors need to have a question if they are expecting to have more sales and make sure that the company’s standard cost for copper
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Laramie Wire Manufacturing - 1. The objective of analytical...

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