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5-55. Trend analysis, common-size financial statements, and ratios are presented for the Brody Corporation in Figure 5.4. Assume that you are auditing Brody's financial statements

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5-55. Trend analysis, common-size financial statements, and ratios are presented for the Brody Corporation in Figure 5.4. Assume that you are auditing Brody's financial statements for the year ended 12/31/X8. You have performed tests of controls over the recording of gross sales and believe that the system is operating effectively and that 7 percent represents an accurate estimate of the increase in gross sales for 208 over the amount for 207. You also should assume that the financial statements for 206 and 207 are not misstated. a. Analyze Figure 5.4 and identify any accounts that appear to represent significant variations from what one might expect. For each of the accounts, identify another account that might also be out of line due to the manner in which the double-entry bookkeeping system records transactions. b. Identify any ratios that appear to represent significant variations from what one might expect. For each ratio, identify the financial statement account or accounts that may be misstated. FIGURE S.4 5-55. Trend analysis, common-size financial statements, and ratios are presented for the Brody Corporation in Figure 5.4. Assume that you are auditing Brody's financial statements for the year ended 12/31/X8. You have performed tests of controls over the recording of gross sales and believe that the system is operating effectively and that 7 percent represents an accurate estimate of the increase in gross sales for 208 over the amount for 207. You also should assume that the financial statements for 206 and 207 are not misstated. a. Analyze Figure 5.4 and identify any accounts that appear to represent significant variations from what one might expect. For each of the accounts, identify another account that might also be out of line due to the manner in which the double-entry bookkeeping system records transactions. b. Identify any ratios that appear to represent significant variations from what one might expect. For each ratio, identify the financial statement account or accounts that may be misstated. FIGURE S.4

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