he BakFirn Corporation end-of-year is 12/31/20XX.Sales for the previous year were $10,000,000. Sales this year are coming in at $9,500,000.The...
dorsnr- he BakFirn Corporation end-of-year is 12/31/20XX.
- Sales for the previous year were $10,000,000. Sales this year are coming in at $9,500,000.
- The firm is in the construction machine industry, making specialty tools.
- Account receivable days sales outstanding (DSO) has been averaging 90–120 days. The year before, it was 80–90 days.
- Inventory turns have decreased from 3 to 2 per year.
- Account receivable and inventory make up 80% of total assets.
- Internal auditing has been reduced by one person to reduce costs.
- An initial test of controls in cash receipt indicated a lack of following procedures.
- The construction industry is in the third year of a downturn. It is forecasted to last two more years.
- The audit team has defined materiality to be focused on account receivable and inventory with $3,000 being the initial threshold. Net income for last year was $1,000,000.
- Inventory at the end of the year was $2,500,000.
- Account receivable at the end of the year was $2,740,000, or 100 DSO.
- 9 years ago
- 5
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