PROFESSIONAL SKEPTICISM 7-19 LO 2,3 The following information shows the past two annual periods of results for a fictional company, Jones Manufacturing, and a com- parison with industry data for the same period. ANALYTICAL DATA FOR JONES MANUFACTURING Prior % of Sales Prior Period (000 omitted) $10,000 $2,000 $6,000 $1,200 Current Period (000 omitted) $11,000 $3,250 $6,050 $1,980 Current % of Sales 100 29.5 55 % Change 10 57.5 0.83 Industry Average as a % of Sales 100 22.5 59.5 14.5 NA 5.85 65 $500 $550 Sales Inventory Cost of goods sold Accounts payable Sales commissions Inventory turnover Average number of days to collect Employee turnover Return on investment Debt/Equity 8% 14% 14.3% 13.8 35% 60% 30 a. Assume that the auditor expects that the client's performance in the current year will be similar to its performance in the prior year. From the preceding data, identify potential risk areas and explain why they represent potential risk. Briefly indicate how the risk analysis should affect the planning of the audit engagement. b. Identify any of the above data that should cause the auditor to increase the level of professional skepticism used on the audit