L9 Notes_Part_8 - 4. Actual to nonfinancial information ex:...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Different Comparisons 1. Industry averages to client balance, use of economic data a. strengths window on competitiveness, market share b. weaknesses (size, conglomerates, misstatement or random fluctuation, historical costs or age differ, different methods, circumstantial evidence needs corroboration, nonsynchronous reporting periods – different fiscal Y/E June 30 for Australia Dec 31 in US.) Point being - Industry comparisons are quite useful but must be interpreted with caution. 2. Actual to budget a. budget - weaknesses? negotiated? idealistic? manager attempts to manipulate actual; consequently, zero percentage change might be worth investigating 3. Actual to prior periods a. balances typically adjusted for known changes - ignores relationship among accounts - ignores changes in business or industry b. ratios - summarizes in one number
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 4. Actual to nonfinancial information ex: Cable Co. Revenue = No. of subscribers X the published rate ex: Hotel revenue = # of rooms X occupancy rate X rate per room. ex: Floor space used to sales 5. Actual to other financial statement accounts ex: sales to sales commissions, sales discounts and allowances, SR&A ex: Notes Payable to interest expense Industry Comparisons Sources of Measurement Errors P2: The following calculations were made as of December 31, 2007 from the records of the Aladdin Products Supply Company, a wholesale distributor of cleaning supplies. 2007 2006 2005 2004 Gross Margin as a percentage of sales 26.4% 22.8% 22.7% 22.4% Inventory turnover (in days) 56.1 47.9 48.3 47.1 List several logical causes of the changes in the two ratios. What should the auditor do to determine the actual cause of the charges?...
View Full Document

This note was uploaded on 10/05/2011 for the course ACG 5637 taught by Professor Monikacaushoulli during the Fall '08 term at University of Florida.

Page1 / 3

L9 Notes_Part_8 - 4. Actual to nonfinancial information ex:...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online