Final Analytical Procedures and Disclosures

question 117

Essay

Final Analytical Procedures and Disclosures.
When auditing Global Alliance Industries, Inc., the auditor performed extensive analytical procedures and found the following:
(a) The commission expenses as a percentage of sales has stayed constant for several years, but has increased significantly in the current year. However, commission rates have not changed.?(b) The rate of inventory turnover has steadily decreased for the past four years.?(c) The inventory as a percentage of current assets has steadily increased for the past four years.?(d) The number of days' sales in accounts receivable has steadily increased for three years.?(e) The allowance for uncollectible accounts as a percentage of accounts receivable has steadily decreased for three years.?(f) The absolute amounts of depreciation expense and depreciation expense as a percentage of gross fixed assets are significantly smaller than in the preceding year.
REQUIRED:
(1) Evaluate the significance of not disclosing or adjusting these items, if material, in the fair presentation of financial statements.
(2) When assessing disclosures, what criteria do auditors use?

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Definitions:

Dinner

The main meal of the day, often eaten in the evening.

Everyone's

Pertaining to or belonging to all people or to each person in a group or category.

Summer

The warmest season of the year, occurring between spring and autumn, characterized by longer daylight hours and increased temperatures.

Aunt's House

Aunt's house typically refers to the residence of one's aunt, often associated with visits or familial gatherings.