Question

I have a question about auditing. I am doing preliminary analytical procedures for Apollo Shoes. I have to
choose three difference relationship(A, B,and C) from the trial balance and hypothesize at least two reasons we
see the change we do, as well as you think RMM should increase, decrease, or remain netural.
I found unusual percentage of increase of Machinery, Equipment and Office Furniture( 576%), but the sale decreased 1%. but I can't find on more relationship. Please help me. Thanks.

Answer 1

First of all you know what is auditing :- Auditing is an independent examinations of checking financial statements of any entity to conclude that it gives true and fair view or not.

There are some specific standards for the auditing. SA 502 That is Analytical Procedures This standard is specifically for the purpose of doing analytical procedures. Analytical Procedures means evaluation of financial statements of an entity through analysis of relationship among both financial and non financial data.

Now with in the choosen A,B,C Here we can include or does comparisons with comparable information for prior periods and also we anticipated results like budgets or forecasts etc. And also we take help from similiar industry information.

Here we see the increase in Machinery , Equipment and Office Furniture so we have to decrease all these which can increase our depreciation expense which then affect by reducing the profits of the company. Also in the case of sale we find that the sale is decreased by 1% Now we have to increase the sale it can increase the net profit or gross profit of the company. after these two adjustments the financial statements provode true and fair view . Now the conclusion is that there is a need to increase the sale and decreasing or reducing the value of Machinery Equipment and office furniture