Ocean Manuf

In: Business and Management

Submitted By joshuawmjiang
Words 1094
Pages 5


1. The client acceptance process can be quite complex. Identify five procedures an auditor should perform in determining whether to accept a client. Which of these five are required by auditing standards?

2. What nonfinancial matters should be considered before accepting Ocean as a client? Howimportant are these issues to the client acceptance decision? Why?

3. Using Ocean’s financial information, perform the following analytical procedures in order to gather valuable planning information. You can use spreadsheet, and be sure to turn in a printout of your work:
(a) Change Analysis. Calculate the dollar and percentage increase or decrease in the various balance sheet and income statement account balances between the fiscal years ended 2007 and 2008. Use the following column headings: Per Per Audit Books Dollar Percent 12-31-07 12-31-08 Change Change

Index your working paper PL-1.

(b) Common Size Financial Statements. From the figures found on the income statement working trial balance, calculate sales returns and expense accounts as a percentage of gross sales for the years 2007 and 2008. Use the following four column headings:

Per 2007 Per 2008 Audit Percent of Books Percent of 2007 Gross Sales 2008 Gross Sales

Index your spreadsheet working paper PL-2. (c) Financial Ratios. Calculate Ocean’s financial ratios to reveal any problem areas and be in a position to assess the financial condition of the company.Compare Ocean’s ratios to the industry ratios provided. Identify any majordifferences.

Index your spreadsheet working paper PL-3.

(d) Analytical Procedures Memorandum. Having carried out these analytical procedures, prepare a memorandum to assess the implications for your upcoming audit of Ocean Manufacturing, Inc. Use word processing software.…...

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