16-24 (Analytical Procedures) Circuits Technology, Inc. (CTI)resells, installs and provides computer networking products (clientsoftware, gateway hardware and software, and twinax hardware) toother businesses. Exhibit 16-24 rpovides some summary informationfrom CTIâs financial statements. Exhibit 16-24 CTI SelectedFinancial Information ($000) 20×1 20×2 20×3 20×4 20×5 AccountsReceivable, net 837 1,335 1,121 962 822 Inventory 1,025 1,327 1,0991,003 1,027 Accounts Payable 164 380 225 201 175 Sales 3,780 5,6384,623 4,022 3,095 Cost of Sales 1,812 2,691 2,399 1,923 1,859 GrossMargin 1,968 2,947 2,224 2,099 2,046 Required 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. Describe the trends identified by performing analyticalprocedures in the gross operating cycle, the net operating cycle,and gross margin. If tolerable misstatement is $ 45,000 forinventory, develop an expectation range for inventory turn days.With respect to inventory, what might these trends indicate aboutthe potential misstatement in inventory? 16-33 (Control activitiesin payroll processing) As part of the audit of Manor Company, youare assigned to review and test the payroll transactions of theGalena plant. Your tests show that all numerical items wereaccurate. The proper hourly rates were used, and the wages anddeductions were calculated correctly. The payroll was properlyfooted, totaled, and posted. Various plant personnel wereinterviewed to ascertain the payroll procedures being used in thedepartment. You determine that The payroll clerk receives the timecards from the various departments supervisors at the end of eachpay period, checks the employeeâs hourly rate against informationprovided by the personnel department, and records the regular andovertime hours for each employee. The payroll clerk sends the timecards to the plantâs data processing department for compilation andprocessing. The data processing department returns the time cardswith the printed checks and payroll register to the payroll clerkon completion of the processing. The payroll clerk verifies thehourly rate and hours worked for each employee by comparing thedetail in the payroll register to the time cards. If errors arefound, the payroll clerk voids the computer-generated check,prepares another check for the correct amount, and adjusts thepayroll register accordingly. The Payroll clerk obtains the plantsignature plate from the accounting department and signs thepayroll checks An employee of the personnel department picks up thechecks and holds them until they are delivered to the departmentsupervisors for distribution to the employees.
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