G 4 J 6 I 8 A 10 D Matching 7 3 Appendix 10 minutes Consider the following key

G 4 j 6 i 8 a 10 d matching 7 3 appendix 10 minutes

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2.G4.J6.I8.A10.DMatching  7-3  (Appendix — 10  minutes)Consider  the following  key financial ratios used  in analytical procedures:A.Quick RatioF.Inventory  TurnoverB.Current  RatioG.Asset TurnoverC.Debt to EquityH.Net Operating  CycleD.Common  Earning  LeverageI.Return  on AssetsE.Accounts Receivable TurnoverJ.Capital Structure  LeverageREQUIRED:  Using the corresponding  letters from the list above, match the key financial ratios  to the following  stated  purposes or interpretations.  (Each item is used  once and  only once.)1.Measures the impact of financing decisions on earnings.2.Estimate of the number  of days a company  holds inventory, from purchase tosale.3.Estimate of the number  of days it takes to collect accounts  receivable.4.Recognizes that a company  may use creditor financing to finance inventorypurchases.5.Measures the degree to which current  liabilities are covered  by current assets.6.Measures the impact of financing on the balance sheet.7.Estimates the protection afforded  to short-term creditors by cash or near-cash assets.8.Measures the relationship  between  sales and  total assets.9.Measures the extent to which a company  is using its debt financing capacity.12
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10.Measures profitability in relationship  to the asset structure  of the company.Answers  — Matching  7-31.D3.E5.B7.A9.C2.F4.H6.J8.G10.IShort  Answer  7-1  (5 minutes)Identify the four phases of a financial statement  audit engagement  and  the applicability of GAAS to each phase.Answers  — Short  Answer  7-1There are four phases in an audit engagement.  Generally accepted  auditing  standards  apply to  all of the phases.  The categories of GAAS applicable to each are:  1.Client acceptance and  retentionGeneral and  field work  2.Planning  the auditGeneral and  field work  3.Performing  audit testsField work  4.Reporting  the findingsField work and  reportingShort  Answer  7-2  (5 minutes)Identify the three generally accepted  auditing  standards  that apply to accepting  an audit  engagement.  For each standard,  indicate the primary  means of complying  with the standard.Answers  — Short  Answer  7-2The standards  are:1.Technical training and  proficiency.  This is accomplished  through  education  for entry into  the profession, practical training and  experience in auditing, and  continuing  professional  education.2.Independence.  This is met by acting with  integrity and  objectivity and  avoiding  relationships  that may impair the auditor’s independence.
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