Analyze the income statement for any potential risk factors and compliance issues with Generally Accepted Accounting...

70.2K

Verified Solution

Question

Accounting

Analyze the income statement for any potential risk factors andcompliance issues with Generally Accepted Accounting Principles(GAAP) or International Financial Recording Standards (IFRS). B.Analyze the risk factors and compliance issues with GAAP or IFRS onthe balance sheet. C. Using the internal control, analyze the cashand revenue for potential risk factors.
1. What risks need to be documented?
2. How does this information compare to the company or industryaverages, or the company’s past performance?
D. Explain the audit universe and how you identified it.
E. Based on your analysis of risk, devise a sampling program forthe audit universe.
F. Choose the most preferable audit testing procedures thatcould be used in the field, based on the audit universe itemssampled in this situation.
ncome Statement
All numbers in thousands
Revenue 1/31/2018 1/31/2017 1/31/2016 1/31/2015
Total Revenue 500,343,000 485,873,000 482,130,000 485,651,000
Cost of Revenue 373,396,000 361,256,000 360,984,000 365,086,000
Gross Profit 126,947,000 124,617,000 121,146,000 120,565,000
Operating Expenses
ResearchDevelopment - - - -
Selling General andAdministrative 104,698,000 101,853,000 97,041,000 93,418,000
Non Recurring - - - -
Others - - - -
Total OperatingExpenses 478,094,000 463,109,000 458,025,000 458,504,000
Operating Income or Loss 22,249,000 22,764,000 24,105,000 27,147,000
Income from Continuing Operations
Total OtherIncome/Expenses Net -7,126,000 -2,267,000 -2,467,000 -2,348,000
Earnings BeforeInterest and Taxes 22,249,000 22,764,000 24,105,000 27,147,000
InterestExpense -2,330,000 -2,367,000 -2,548,000 -2,461,000
Income BeforeTax 15,123,000 20,497,000 21,638,000 24,799,000
Income TaxExpense 4,600,000 6,204,000 6,558,000 7,985,000
MinorityInterest 2,953,000 2,737,000 3,065,000 4,543,000
Net Income From Continuing Ops 10,523,000 14,293,000 15,080,000 16,814,000
Non-recurring Events
DiscontinuedOperations - - - 285,000
ExtraordinaryItems - - - -
Effect Of AccountingChanges - - - -
Other Items - - - -
Net Income
Net Income 9,862,000 13,643,000 14,694,000 16,363,000
Preferred Stock AndOther Adjustments - - - -
Net Income Applicable To CommonShares 9,862,000 13,643,000 14,694,000 16,363,000

Answer & Explanation Solved by verified expert

4.1 Ratings (585 Votes)

RISK FACTORS The potential risk factors and compliance issues with Generally Accepted Accounting Principles GAAPincome statement Cash flow treatment Generally Accepted Principles require that firms should record income on the accrual basis Revenues and expenses should only be recognized when the firm has earned it and not when it has paid the liability or received the cash This will create the risk if the firm uses the cash basis Treatment of revenue from multiple obligations most of the firms have failed to identify the best method to recognize revenue from that is attached to multiple obligations This has since caused the International Reporting Standards 15 to clarify this dilemma The risk of material misstatements The financial information which are not prepared using the acceptable accounting policies may have potential misstatement which will affect the decision making of the public The international reporting body requires that firm must prepare their statements under the guidance of the body guidelines Analyze the risk factors and compliance issues with GAAP or IFRS on the balance sheet Choice of method depreciation This is one of the potential areas See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Revenue	1/31/2018	1/31/2017	1/31/2016	1/31/2015
Total Revenue	500,343,000	485,873,000	482,130,000	485,651,000
Cost of Revenue	373,396,000	361,256,000	360,984,000	365,086,000
Gross Profit	126,947,000	124,617,000	121,146,000	120,565,000
Operating Expenses
ResearchDevelopment	-	-	-	-
Selling General andAdministrative	104,698,000	101,853,000	97,041,000	93,418,000
Non Recurring	-	-	-	-
Others	-	-	-	-
Total OperatingExpenses	478,094,000	463,109,000	458,025,000	458,504,000
Operating Income or Loss	22,249,000	22,764,000	24,105,000	27,147,000
Income from Continuing Operations
Total OtherIncome/Expenses Net	-7,126,000	-2,267,000	-2,467,000	-2,348,000
Earnings BeforeInterest and Taxes	22,249,000	22,764,000	24,105,000	27,147,000
InterestExpense	-2,330,000	-2,367,000	-2,548,000	-2,461,000
Income BeforeTax	15,123,000	20,497,000	21,638,000	24,799,000
Income TaxExpense	4,600,000	6,204,000	6,558,000	7,985,000
MinorityInterest	2,953,000	2,737,000	3,065,000	4,543,000
Net Income From Continuing Ops	10,523,000	14,293,000	15,080,000	16,814,000
Non-recurring Events
DiscontinuedOperations	-	-	-	285,000
ExtraordinaryItems	-	-	-	-
Effect Of AccountingChanges	-	-	-	-
Other Items	-	-	-	-
Net Income
Net Income	9,862,000	13,643,000	14,694,000	16,363,000
Preferred Stock AndOther Adjustments	-	-	-	-
Net Income Applicable To CommonShares	9,862,000	13,643,000	14,694,000	16,363,000