ShatanaBentley-AC410-Auditing-Unit3-Homework - AC 410 Unit...

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Your Name: Shatana Bentley (Use this template to answer your Unit 3 homework assignment. This template is provided to help guide you through the answer process and is organized in the way that I will grade your assignment. Your text box will expand as you type in your answers. You will notice that in some cases I have designated a word minimum. This is to encourage you to thoroughly explore and provide a complete answer. There are other responses where you need to provide a certain minimum facts for a complete answer <such as: at least 5 relevant items> you need to provide at least 5 relevant items for full credit. ) 4-56 Part A Analysis/Interpretation (Company trends, comparison to industry) (minimum of 20 words) What are the implications for the audit (20 word minimum) How does this affect your approach as an auditor as to how to test these areas? ““ (Minimum of 20 words)  (Example)  Indianola has steadily decreased its  than 33 percent of the industry average.   (Example)  This signals potential long-run problems  with the company, because unless successful research  and development is the key to success in the  pharmaceutical industry, the company develops and  successfully introduces new products, it has potential  going-concern problems. (Example)  The auditor needs to discuss  ability to remain viable within the market. 1 Indianola's sales growth seems to of increased but also seems to still be below that of the industry average. This increase also seems to of come with worse credit. This signals that although Inianola's sales growth seems to increase, their credit gets worse with that increase. They also do not seem to be able to get above the industry average. The auditor needs to discuss with management about its ability to remain viable with in the market because although its growth has increased it still remains below average. 2 Indianola's debt/equity ratio has increased greatly, which brings up concerns that debt covenants may have been violated. With Indianolas debt/equity ratio increasing greatly it can signify that Indianola may record a transaction but not make the correct accounting judgements. The auditor needs to discuss with the audit committee whether or not the financial statements of Indianola are fairly presented and whether or not the accounting principles that management has chose are the most appropriate. 3 Indianola's significant increase in the amount of day's sales in recieveables could reflect other problems such as governmental With Indianola's significant increase in daily sales it could signify that real sales are not being kept up with in the way that they should be and sales The auditor needs to discuss with management a system they could design
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This note was uploaded on 01/02/2012 for the course AC 410 taught by Professor Daniels during the Fall '09 term at Kaplan University.

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ShatanaBentley-AC410-Auditing-Unit3-Homework - AC 410 Unit...

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