Carinal Ltd specializes in the development of electronic components within quite a

competitive environment causing concerns for marketing and pricing. Its noncurrent assets

primarily include IT software, property, and investments, and there have been additions to

these during the year.

As audit manager, you are conducting a preliminary analytical review and associated risk

analysis for this client for the year ended June You have been presented with the

following draft financial information about Carinal with incomplete ratios and percentages

calculation.

INCOME STATEMENT

Year ended June

$ $

Revenue

Cost of sales

Gross Profit

Distribution costs

Administrative expenses

Selling expenses

Profit from operations

Net interest receivable

Profit before tax

Income tax expense

Net profit

Retained profits

Dividends paid $ $

Accounting ratios and percentages

Earnings per share

Performance ratios include the following:

Gross margin Gross profitrevenue

Expenses as a percentage of revenue:

Distribution costs

Administrative expenses

Selling expenses

Operating profit as a percentage of revenue

Part A

Required

Using the information above, complete the calculation of accounting ratios and

percentages and comment briefly on the performance of the company for the two

years. Marks

By reference to requirement identify the areas that are subject to increased audit

risk and describe the further audit work you would perform in response to those risks.

Marks

Part B

By reference to Part A:

What is the purpose of using analytical procedures on the clients performance

measurement system? Marks

What are some of the key factors that impact group interaction in an audit

assignment? Marks