A planning memo is typically used to summarize the considerations and conclusions
involved in several of the audit planning phases you’ve read about in Chapter 3.
Chapter 03 Mini-case Planning Memo Cont. Part 2
2
.
In addition to the analytical procedures already listed in the memo, analyze an additional
four that are useful in the planning process for the EarthWear audit. Discuss the meaning
of the analytical procedures included and how they may affect your audit plan/procedures.
Work Paper 3-6
and the Common Size
Balance Sheet
and
Income Statement
for
EarthWear 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 0.15
EarthWear's Inventory Turnover is 3.88 and the industry average is 6.20
EarthWear'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 0.84
rev: 02_22_2012
rev: 10_03_2013_QC_35606, 01_09_2014_QC_43161
PART FOUR
In 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
50000
50000
50000
50000
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. The
numbers to the left of the control activities correspond with the control activity numbers on
Work Paper 6-2. To better understand the control activities you are to observe, please read
Exhibit 11-1
in the textbook, which provides a description of EarthWear's purchasing
system.
References
eBook& Resources
Section Break
Chapter 06 Mini-Case Tests of Controls (Part 1)
1.
value:
100.00 points
Note:
This question will not be automatically graded.
It will be sent to your instructor for review.
Required information
Chapter 06 Mini case Tests of Controls (Part 2)
Complete the review of the internal control activities for the vouchers below. Record your
findings in the fields on Work Paper 6-2 indicated below. The list of control activities that
correspond 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 11-1
of the textbook.
