The following information shows the past two periods of results for a fictional company, Jones Manufacturing, and a comparison with industry data for the same period:

ANALYTICAL DATA FOR JONES MANUFACTURING

a. 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 professionalskepticism.

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Industry Average as Curment Prior Period Percent Period (000 Percent Percent a Percent of (000 omitted) of Sales omitted) of Sales Change Sales Sales Inventory Cost of goods sold $6,000 Accounts payable ,200 Sales commissions Inventory turnover Average number of days to colled Employee turnover Return on investment Debt/Equity 100 22.5 59.5 14.5 10 Not available 5.85 36 $10,000 10 100 $11,000 100 20 3,250 29.5 57.5 60 $6,050 55 0.83 12 $1,980 $2,000 18 65 $550 $500 6.3 39 4.233 48 23 5% 14% 35% 8% 60 14.3% - 60% - 13.8 71 30