BUSI 3172U Lecture Notes - Lecture 6: Inventory Turnover, Quick Ratio, Gross Margin
Document Summary
Ratios can be looked at for business risk: current ratio, d/e, eps, quick ratio. Inherent risk: inventory turnover: assets/account balances compared to prior years, a/r turnover (valuation, gross margin, expenses as % of sales. Note: better to read the requirements first before reading the full case. Note: gocc practice case will be similar to pep program cases. Notes for the case: information given will always be relevant somewhere; point-form requirement answers but write with explanations; Case facts therefore explain how/why it affect aar . Gocc is a private company therefore aar is higher due to limited user reliance. Plans to go public therefore higher degree of scrutiny of the financial statement which lowers aar. Owner didn"t have a good relationship with the previous auditor. Therefore, aar is decreased because there may be integrity issues. Our first time auditing gocc therefore we are not familiar with management or their integrity which decreases aar.
