Question :
As the audit senior for Beachwear Pty Ltd, you have performed some analytical procedures as part of your planning for the year ended 30 June 2016 audit. A summary of the analytical procedures is shown below:
|
|
30 June 2016
|
30 June 2015
|
|
Current ratio
|
1.4
|
1.5
|
|
Debt-to-equity ratio
|
0.8
|
0.5
|
|
Times interest earned
|
4.1
|
6.2
|
|
Accounts receivable turnover (days)
|
43
|
33
|
|
Inventory turnover (days)
|
56
|
45
|
|
Return on sales (%)
|
9
|
7
|
|
Gross profit margin (%)
|
35
|
30
|
Required
Discuss the impact of the above analytical review procedures on your audit plan for 30 June 2016.
[Note: You need to understand what is analytical procedures and how is this used in auditing. Each analytical procedure will be discussed individually and then there will be some general comments at the end.