Week3_Bancroft

Week3_Bancroft - 5-55a.Analytical procedures are performed...

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Unformatted text preview: 5-55a.Analytical procedures are performed at the risk assessment stage of the audit so auditors can get a better understanding of the clients business and how it runs. The procedures are also used to help the auditor(s) find inconsistencies, unusual events and transactions that can lead to uncovering fraud or mistakes, and other things that may have an effect on the financial statements and their fairness.b.SalesPY+700$ 10,800 COGS7,468 Gross profitTotal Sales (TS)*.6915$ 3,332 Sales commissionsTS*.07$ 756 AdvertisitngTS*.02216 SalariesPY+211,124 Payroll taxesPY+8207 Employee benefitsPY+7188 RentPY+163 DepreciationPY+369 SuppliesPY+2132 UtilitiesPY+124 Legal and accountingPY+343 MiscellaneousPY+115 Interest expensePY+12252 Total expenses$ 2,989 NIBT$ 343 Incomes taxes343*.209 (.22*.95)$ 72 Net income$ 271 c.10800*.31= 33483348-3332= $16 expected differenced.I would think that $16,000 is immaterial. I say this because the text states that a material misstatement is between 5% and 10% of NIBT. This misstatement is 4.66%, which is under 5%. It is close to 5% though, and some may say it is material. When rounding 4.66%, you get 5%. I think this is where the auditor has to make the call and decide what is material and what isnt....
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Week3_Bancroft - 5-55a.Analytical procedures are performed...

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