Question
Galaxy Limited is a large, well-established computer components manufacturer that sells components to computer stores. The industry is very competitive due to chancing technology. Galaxy
Galaxy Limited is a large, well-established computer components manufacturer that sells components to computer stores. The industry is very competitive due to chancing technology. Galaxy Limited has been making only small profits for the last couple of years. Its bank loan is contingent on its continuing to earn a profit.
As a result of competitive pressures, Galaxy Ltd has recently relocated the manufacture of some of its computer components from Perth and Hong Kong to Southern China. This has reduced manufacturing costs; however, occasional quality problems have resulted in some lost orders.
Sales staff have previously been paid a fixed salary based on the number of years they have been with the company. However, a new commission scheme is being introduced this year whereby staff will be paid a lower fixed salary, but will receive a 4% commission if their individual sales targets are met or exceeded.
Galaxy Ltd plans to upgrade its general ledger reporting with a new software package. The conversion is planned for just before year-end so that it will be ready for next year. The new computer system will provide detailed information on sales, gross margins and inventory levels by product line.
Identify the factors in the above case that will impact the planning of the audit for Galaxy Ltd.
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