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A planning memo is typically used to summarize the considerations and conclusionsinvolved in several of the audit planning phases you’ve read about in Chapter 3.Chapter 03 Mini-case Planning Memo Cont. Part 22.In addition to the analytical procedures already listed in the memo, analyze an additionalfour that are useful in the planning process for the EarthWear audit. Discuss the meaningof the analytical procedures included and how they may affect your audit plan/procedures.Work Paper 3-6and the Common Size Balance Sheetand Income StatementforEarthWear have been provided to assist you.Analyze 4 additional analytical procedures that were completed in the planning -2-2
process.EarthWear's Quick Ratio is 0.95 and the industry average is 0.15EarthWear's Inventory Turnover is 3.88 and the industry average is 6.20EarthWear's Gross Profit Percentage is 43.90% and the industry average is 38.80%EarthWear's Debt to Equity ratio is 0.50 and the industry average is 0.84rev: 02_22_2012rev: 10_03_2013_QC_35606, 01_09_2014_QC_43161PART FOURIn this mini-case you will complete the tests of internal controls on accounts payable for the audit of EarthWear Clothiers' 2012 financial statements. A sample size of 78 accounts payable voucher packets has been selected for the test of internal controls on the accounts payable system. The sample size is designed to provide high level of assurance (or confidence) that a control is operating effectively so long as one or fewer control deviations is observed for each control activity tested. The first 74 voucher packets have already been tested by other staff members and no errors have been found. Your task is to review the remaining four voucher packets.Enter and evaluate the test results by completing all the fields indicated in Work Paper 6-1 and Work Paper 6-2. For any control activities that are not operating effectively, you are 50000500005000050000
asked to briefly describe the implications for the audit plan (i.e. additional substantive testing to obtain evidence related to a particular assertion, etc.).Review the list of control activities you are to test as indicated on Work Paper 6-1. Thenumbers to the left of the control activities correspond with the control activity numbers onWork Paper 6-2. To better understand the control activities you are to observe, please readExhibit 11-1in the textbook, which provides a description of EarthWear's purchasingsystem.ReferenceseBook& ResourcesSection BreakChapter 06 Mini-Case Tests of Controls (Part 1)1.value:100.00 pointsNote:This question will not be automatically graded.It will be sent to your instructor for review.Required informationChapter 06 Mini case Tests of Controls (Part 2)Complete the review of the internal control activities for the vouchers below. Record yourfindings in the fields on Work Paper 6-2 indicated below. The list of control activities thatcorrespond with the control activity numbers on the schedule can be found on Work Paper 6-1 and a narrative description of the controls can be found in Exhibit 11-1of the textbook.