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Analytical Procedures-Ratio Relationships

State how the ratio in question would compare(greater, equal, or less) to what the ratio should have been had the error or fraud not occurred.

The company recorded fictitious sales with credits to sales revenue accts. and debits to A/R. Inventory was reduced, and cost of goods sold was increased for the profitable sales. Is the current ratio great than, equal to, or less than what it should have been?

Solution Preview

Please find attached, a formatted MS Excel spreadsheet containing the text below:

Analytical Procedures-Ratio relationships

State how the ratio in question would compare (greater, equal, or less) to what the ratio should have been had the error or fraud not occurred.

The company recorded fictitious sales with credits to sales revenue accts. and debits to A/R. Inventory was reduced, and cost of goods sold was increased for the profitable sales. Is the current ratio greater than, equal to, or less than what it should have been?

The current ratio is basically a test of a company's financial strength.  It calculates how many dollars in a company's assets are likely to be converted to cash within one year in order to pay debts that come due in the same year.  The current ratio can ...

Solution Summary

Please find attached, a formatted MS Excel spreadsheet containing examples of analytical procedures used in the determination of ratio relationships.

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