Question: c. You have calculated the following ratios for your client Archie Ltd: Industry averages Archie Ltd 20x1 20x1 Days to sell inventory Current ratio

c. You have calculated the following ratios for your client Archie Ltd:

c. You have calculated the following ratios for your client Archie Ltd: Industry averages Archie Ltd 20x1 20x1 Days to sell inventory Current ratio The same as last year - 126 days Dropped from 83 to 80 days The same as last year - 2.0 Dropped from 2.6 to 2.05 As part of a debenture deed, the company has a contractual commitment to maintain a current ratio of 2.0. If this ratio falls below that level on the balance sheet date, the debentures become payable immediately. Required: How do the above ratios affect your audit plan and investigation? Explain. (8 marks)

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