Audit Planning and Analytical Procedures

February 3, 2010 at 3:45 am Leave a comment

Internet Problem ( NAO1)

Questions :

Internet Problem 8-1 (Industry Research and Client Acceptance)

The vignette at the beginning of Chapter 6 in the text contains a brief description of the ZZZZ Best fraud. One area where the auditors were particularly criticized in that audit had to do with the auditors’ lack of industry knowledge. With hindsight it appeared that the fraud should have been easily detected because ZZZZ Bests’ large restoration contracts were in excess of $7 million while the largest restoration jobs on record in the insurance restoration industry were less than $3 million.

You have been approached by On the Sunny Side, a team sports uniform designer and manufacturer for women, about performing the company’s financial statement audit. The company began operations eight years ago and has experienced strong growth in the last several years. Teri Kloth, the chief executive officer, has told you that her company expects production in 2004 to be 450,000 units. She also provided summary historical financial and operating data regarding unit sales. In   2002 and 2003, the company reported sales of 365,000 and 402,000 units, respectively.

Are On the Sunny Side’s 2002 and 2003 unit sales reasonable? Why or why not? (Hint: Visit the U.S. Census Bureau’s web site. Once you are at the site, go to the “Business” section and then to the “Manufacturing” sector-specific data section. Once you are there, locate the Current Industrial Reports. Next search the CIRs by Subject Title for Apparel. Data about women’s team sports uniforms can be found by search for “Apparel.” Use the most current annual report for your analysis. click here


Entry filed under: AUDITING 2.

Audit Evidence Materiality and Risk

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