THE AUDIT OF VOSPA LTD For the year ended 31 December 20X3 TQ7: Analytical Procedures Read ISA (NZ) 520: Analytical Procedures and ISA (NZ) 320: Materiality in Planning and Performing and Audit Using the information in the unaudited financial statements for Vospa Ltd. for the year ended 31 December 20X3 (refer to Excel File - TQ7 VOSPA LTD Financial Statements), complete the following ratio calculations. Note that this is the stage where the auditor uses his or her understanding of the business, the industry and the results of the ratio calculations (analytical procedures) in audit planning to anticipate any account balances and assertions that are likely to be misstated, and also to plan the initial audit responses. Required: a. Calculate the following ratios for Vospa Ltd and compare them with the comparative industry data (stated on the unaudited financial statements) for the same periods. Ratio 20X3 20X2 20X1157 Sales / Net Fixed Assets 4.68 3.63 4.15 13.0 10.9 7.4 Median 158 6.1 4.7 4.3 Lower Quartile 159 160 31.0 35.0 37.0 Upper Quartile 161 AR Turnover in Days 72 71 85 45.0 46.0 51.0 Median 162 59.0 68.0 62.0 Lower Quartile 163 164 34.0 24.0 37.0 Upper Quartile 165 Inventory Turnover in Days 97 79 98 50.0 50.0 54.0 Median 66 91.0 89.0 85.0 Lower Quartile 167 168 169 Comparative Industry Data 170 171 20X3 20X2 20X1 20X3 20X2 20X1 172 Unaudited Audited Audited 173 174 Gross Operating Cycle 169 151 183 175 176 19.0 12.0 12.0 Upper Quartile 177 AP Turnover in Days 58 52 61 30.0 25.0 26.0 Median 178 47.0 42.0 42.0 Lower Quartile 179 Net Operating Cycle 111 99 122 181 182 183 2.3 2.7 3.5 Upper Quartile 184 Current Ratio 1.91 1.99 1.78 1.5 1.8 1.7 Median 185 1.0 1.2 1.1 Lower Quartile 186 87 1.4 1.9 1.8 Upper Quartile 188 Quick Ratio 1.00 1.19 1.02 0.8 1.1 1.0 Median 189 0.5 0.7 0.7 Lower Quartile 190b. Based on the information in (a) above, discuss the conclusions you would arrived at for the company. For any areas where you have audit concerns: 1. Identify the account balances and assertions that may be misstated, 2. Explain why your analytical procedures indicate that the assertion might be misstated, and 3. Discuss possible audit procedures to detect misstatements if they exist. 177 AP Turnover in Days 58 52 61 30.0 25.0 26.0 Median 178 47.0 42.0 42.0 Lower Quartile 179 180 Net Operating Cycle 111 122 181 182 183 2.3 2.7 3.5 Upper Quartile 184 Current Ratio 1.91 1.99 1.78 1.5 1.8 1.7 Median 185 1.0 1.2 1.1 Lower Quartile 186 187 1.4 1.9 1.8 Upper Quartile 188 Quick Ratio 1.00 1.19 1.02 0.8 1.1 1.0 Median 189 0.5 0 .7 0.7 Lower Quartile 190 191 Free Cash Flow $ (1,767.863) $ (2.828.684) S (173,476) 192 193 Cash Flow from Operations to Current Debt + Dividends (3.35 0.25 0.24 194 195 0.7 0.6 0.5 Upper Quartile 196 Debt / Worth 1.92 1.69 1.27 1.6 1.3 1.9 Median 197 6.4 4.3 8.5 Lower Quartile 198 199 200 201 202 203 2043.5 upper uarti 39 Asset Turnover (Sales / Total Assets) 1.54 1.41 1.35 2.5 2.4 2.2 Median 40 1.7 1.7 1.4 Lower Quartile 41 42 Profit Margin (% profit before taxes / sales) 2.2% 0.1% 2.4% 2.9% 5.2% 6Median 43 44 14.0 18.5 19.7 Upper Quartile 15 ROA (% profit before taxes / total assets) 3.4% 0.1% 3.2% 8.2 8.8 3.9 Median 46 2.5 1.6 0.3 Lower Quartile 47 48 1.7 1.6 1.5 Upper Quartile 49 Capital Structure Leverage (Total Assets / Total Equity) 2.92 2.69 2.27 2.6 2.3 2.9 Median 50 7.4 5.3 9.5 Lower Quartile 51 52 43.3 44.6 45.8 Upper Quartile 53 Return on Equity (% profit before taxes / tangible net worl 10.0% 0.3% 7.2% 25.1 24.1 19.7 Median 54 6.3 5.7 2.0 Lower Quartile 55 56 32.8 37.6 14.6 Upper Quartile 57 Sales / Net Fixed Assets 4.68 3.63 4.15 13.0 10.9 7.4 Median 58 6.1 4.7 4.3 Lower Quartile 59 60 31.0 35.0 37.0 Upper Quartile