Assignment -
This Assignment requires that you prepare an Excel Spreadsheet - similar to one that would be used in practice in the planning phase of the audit. The auditor must first develop an expectation, usually based on the performance in the prior period (taking into consideration any unusual circumstances in the current period). We will assume no unusual circumstances in the current period. This company is a new and growing company, and we would expect sales to increase in the current period (compared to the previous period).
Requirements:
(a) Prepare common size Income Statements and Balance Sheets for the prior and current periods.
(b) Based on the relationships in the prior period Income Statements and assuming Sales of $900,000, calculate the expected amounts (dollar amounts) for the various expense accounts (including COGS). All calculations should be completed in the Excel spreadsheet.
(c) Prepare a column that shows the dollar difference between our expected amounts and actual amounts (for expense accounts and COGS). Assuming that the tolerable misstatement for planning purposes on the audit is $ 15,000 highlight accounts that will require more extensive examination and testing (based only on this particular measure).
(d) Some income statement accounts are better analyzed by looking at their relationship to balance sheet accounts (and vice versa). For example, the investment income (an income statement account) is dependent on rates of return and changes in the Investment account (a balance sheet account). In the Foxx Statements, there has been no change in the amount of their investment, so it is reasonable that there has been little change in the Investment Income account. Using the Foxx Corporation Financial Statements, provide a similar example and an explanation of the relationship.
Attachment:- Assignment File.rar