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8-16(Analytical procedures) In audit planning the audit of Circuits Technology, Inc. (CTI). CTI resells, installs, and provides computer networking products (client software, gateway
hardware and software, and twinax hardware) to other businesses. Figure 8-14 provides
some summary information from CTI’s financial statements.
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Figure 8-14 ■ CTI Selected Financial Information ($000)
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20×1
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20×2
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20×3
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20×4
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20×5
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Accounts receivable, net
Inventory
Accounts payable
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$ 837
1,025
$ 164
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$ 1,335
$ 1,327
$ 380
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$ 1,121
$ 1,099
$ 225
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$ 962
$ 1,003
$ 201
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$ 822
$ 1,027
$ 175
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Sales
Cost of sales
Gross margin
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$ 3,780
$1,812
$1,968
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$ 5,638
$ 2,691
$ 2,947
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$ 4,623
$2,399
$ 2,224
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$ 4,022
$ 2,095
$ 1,927
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$ 3,905
$ 1,859
$ 2,046
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8-16 Part a CTI Selected Financial Information ($000)
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a. Calculate purchases, gross margin, inventory turn days, accounts receivable turn days,
and accounts payable turn days for the years ended 20×2, 20×3, 20×4, 20×5.
b. Describe the trends identified by performing analytical procedures in the gross operating
cycle, the net operating cycle, and gross margin.
c. If tolerable misstatement is $45,000 for inventory, develop an expectation range for inventory turn days.
d. With respect to inventory, what might these trends indicate about the potential mis misstatement in inventory?
