Analytical Procedures. At the beginning of the annual audit of Porster, BV, wholesale distributor of Valkenburg, the Netherlands, Lynna Heijn, Registeraccountant, was given a copy of Porster's financial statements as prepared by the company's accountant. On reviewing these statements, Heijn noted the following abnormal conditions:
1 The accounts receivable outstanding at the year-end represent an unusually high number of average days' credit sales.
2 The inventories on hand at the year-end represent an unusually high proportion of the current assets. 3 The working capital ratio of the company is almost twice that of the previous year.
4 The percentage of gross profit on net sales is considerably in excess of that of previous years.
5 The rate of turnover of inventory is unusually low in comparison with previous years
Required:
Taking all the above conditions together, what irregularities might Heijn suspect regarding sales and inventories? [CICA adapted]