(A) You decide to perform some preliminary analytical review on the information provided by the Finance Director, in order to help with the planning of this year?s audit.

Prepare a common-size (vertical) analysis of both the Balance Sheet and Income Statement for both years. Use ?Total Assets? as your base figure for the Balance Sheet and ?Sales? as your base figure for the income statement.

Prepare a trend (horizontal) analysis for 2015, comparing all figures to the prior year and noting the % change in each.

For both years, calculate:

2 liquidity ratios (current ratio and quick ratio);

4 activity ratios (accounts receivable turnover, days to collect, inventory turnover, days to sell);

2 long term solvency ratios (debt/equity, tangible net assets/equity); and

2 profitability ratios (net profit and return on total assets).

Use Excel to answer all three parts. Produce working sheets (these will show the formulae you used) to calculate the ratios. (12 marks).

ASSIGNMENT - Using Excel as Audit Software You work for the audit firm of Check and Recheck CAs. One of your newest clients is Griffith Thermometers Limited. The company is only 3 years old. You are planning the audit for the year ending 30 June 2015. The client's Finance Director provides you with the preliminary (draft) balance sheet and income statement information which includes the comparative figures for 2014, which your firm audited last year. (The Excel file \"Ass3102152Qs.xlsx\" has the data.) Required (A) You decide to perform some preliminary analytical review on the information provided by the Finance Director, in order to help with the planning of this year's audit. (1) Prepare a common-size (vertical) analysis of both the Balance Sheet and Income Statement for both years. Use \"Total Assets\" as your base figure for the Balance Sheet and \"Sales\" as your base figure for the income statement. (2) Prepare a trend (horizontal) analysis for 2015, comparing all figures to the prior year and noting the % change in each. (3) For both years, calculate: 2 liquidity ratios (current ratio and quick ratio); 4 activity ratios (accounts receivable turnover, days to collect, inventory turnover, days to sell); 2 long term solvency ratios (debt/equity, tangible net assets/equity); and 2 profitability ratios (net profit and return on total assets). Use Excel to answer all three parts. Produce working sheets (these will show the formulae you used) to calculate the ratios. (12 marks). (B) Write a brief (1 page only) memo to your audit senior, cross reference your comments to the appropriate spreadsheets. (2 marks). The memo should list four areas of possible concern (overall issues and/or specific account balances) based on your findings in part (A) above. (6 marks). Ass3102152Page 1 Griffith Thermometers Ltd. Preliminary F/Ss for 30/06/2015 BALANCE SHEET Cash Trade accounts receivable Audited Preliminary 30/06/2014 30/06/2015 $ $ 267,962 487,378 4,449,842 7,088,018 Allowance for uncollectible accounts Inventories Prepaid expenses Total current assets - 430,000 240,000 7,776,800 9,041,804 49,400 59,000 12,114,004 16,436,200 Property, plant and equipment: At cost 19,845,068 25,890,510 Less, accumulated depreciation Goodwill Total Assets Accounts payable Bank loan payable Accrued liabilities Income tax payable - 7,551,822 - 8,765,980 12,293,246 17,124,530 690,000 2,400,000 25,097,250 35,960,730 5,053,578 1,196,040 3,518,000 4,283,104 300,000 1,447,200 2,400,000 480,000 10,247,618 480,000 8,910,304 2,400,000 12,647,618 1,920,000 10,830,304 2,000,000 2,667,602 7,782,030 12,449,632 25,097,250 2,500,000 4,939,842 17,690,584 25,130,426 35,960,730 Current portion of long-term debt Total current liabilities Long-term debt Total Liabilities Shareholder's equity: Ordinary Shares- paid up Class A shares - paid-up Retained profits Total Equity Liabilities and equity INCOME STATEMENT Sales Cost of goods sold Gross profit Audited Preliminary 6/30/2014 30/06/2015 $ $ 64,516,030 87,989,862 38,064,458 48,394,424 26,451,572 39,595,438 Selling, general and administrative expenses Superannuation cost Interest cost Operating Profit before tax Income tax expense Operating Profit after tax Opening retained profits Dividends declared Ending Retained Profits 17,800,864 1,730,060 208,440 19,739,364 6,712,208 21,184,442 2,235,690 166,752 23,586,884 16,008,554 2,282,000 4,430,208 3,600,000 12,408,554 5,351,822 7,782,030 9,782,030 20,190,584 - 2,000,000 - 2,500,000 7,782,030 17,690,584