Crazy eddie key ratios

These are not usual patterns. How should you and your superiors have responded to this situation? Short-term investments had a zero balance until when it went to A common sized balance sheet and income statement as well as the classic ratios are attached in Excel and the commentary discusses which of these would likely have signaled or should have signaled higher audit risk.

Identify and briefly explain the red flags Crazy eddie key ratios Crazy Eddies financial statements that suggested the firm posed a higher-than-normal level of audit risk.

The gross margin is improving during a period of intense competition and the operating profit margin, return on assets and return on equity are all getting worse.

The balance sheets for to show some huge irregularities in the accounts between the years. An analysis of key ratios during the period of would have resulted in red flags that indicated that Crazy Eddie had a higher than normal level of audit risk.

Crazy Eddie was facing increased competition and market saturation yet still managed to increase profits. It is important to move electronics in the inventory fast because the technology gets obsolete quickly.

Short-term debt increased from. The large size of inventory almost half of total assets would have made inventory a high risk area of focus. The fluctuation analysis signals high risk.

The inventory turnover decreased from 4. I would not have pre-announced the inventory How can this practice potentially affect the quality of independent audit services?

Identify specific audit procedures that might have led to the detection of the following accounting irregularities perpetrated by Crazy Eddie personnel: Discuss the pros and cons of this practice. Assume that client personnel were unable to locate 10of these invoices. For instance, cash fell from 34 in to 3.

When gross margin improves considerably, the overall picture usually gets better.

Should companies be allowed to hire individuals who formerly served as their independent auditors? For instance, they did not plan for market saturation and an explosion of competition which led to their inventory being undersold and obsolete.

Explain what is implied by the term lowballing in an audit context. The inventory ratios verified that there was a problem with the accounting at Crazy Eddie. Solution Summary Your tutorial is words and discusses the question posed.

The retail consumer electronics industry was undergoing rapid and dramatic changes during the I s. I have highlighted the lines in the attached Excel spreadsheet where I have common-sized the balance sheet and income statements and computed two years of ratios. The inventory turnover has shifted and that would be another signal for attention.

A red flag came up when analyzing the merchandise inventories to total assets ratios which were Identify and briefly explain the red flags in Crazy Eddies financial statements that suggested the audit posed a higher-than-normal level of audit risk.

Another area that would concern me is that sales are up but Accounts Payable is down they usually move together. Cash and restricted cash were There is also a problem with accounts receivable, the turnover decreased from The speculative unrelated investments would have been a high risk signal.

You selected 30 invoices entered in the accounting records near year-end:To get the work done and satisfy Crazy Eddie’s management, PMM would have to skimp on certain key procedures.

This plan worked every year. Taking advantage of the auditor’s human frailties. Mar 10,  · The inventory ratios verified that there was a problem with the accounting at Crazy Eddie to days.

Audit Case study 8 Crazy Eddie, Inc.

1. Compute key ratios and other financial measures for Crazy Eddie during the period Crazy Eddie Case Questions 1. Compute key ratios and other financial measures for Crazy Eddie during the period Identify and briefly explain the red flags in Crazy Eddie’s financial statements that suggested the firm posed a higher-than-normal level of audit risk.

Compute key ratios and other financial measures for Crazy Eddie during the period Identify and briefly explain the red flags in Crazy Eddies financial statements that suggested the firm posed a higher-than-normal level of.

Auditing Case 2: Crazy Eddie, Inc. 1.

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An analysis of key ratios during the period of would have resulted in red flags that indicated that Crazy Eddie had a higher than normal level of audit risk. Compute key ratios and other financial measures for Crazy Eddie during the period Identify and briefly explain the red flags in Crazy Eddie’s financial statements that suggested the firm posed a higher-than-normal level of audit risk.

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Crazy eddie key ratios
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