Preliminary analytical procedures are performed as part of

Preliminary analytical procedures are performed as part of the planning process to assist the auditor in gaining an understanding of the entity and its environment (ASA 315 ‘Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment’). Required: From the three rows of data shown below for Georgie Manufacturing Pty Ltd: (a) what conclusions would you draw from the ratio analysis (i.e. interpret any movement in the ratio and discuss the audit risks that could be present); and (b) what areas would you then emphasise in conducting the audit in relation to the risks identified in your conclusions. Millicent Manufacturing Pty Ltd 2016 2015 2014 2013 Industry 2016 1. Inventory Turnover 3.40 3.21 4.66 5.64 4.88 2. Current Ratio 1.65 1.69 2.08 2.31 2.00 3. Days Sales in Receivables 99 86 90 62 60 Question 1 Part B continued a) Inventory Turnover Conclusions:

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Audit Emphasis:

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b) Current Ratio Conclusions:

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Audit Emphasis:

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c) Days Sales in Receivables Conclusions:

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Audit Emphasis:

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