Case 8.1 Laramine Wire

Case 8.1: Laramie Wire Manufacturing

1. Analytical procedures to help identify risky areas that indicate the need for further attention during the audit, if any:

a. Why are their more inventories than last year

b. IPO projected for next year  look closely at revenues to make sure what they get for their IPO value is accurate

c. Figure out why days sales in receivables increased so much

d. COGS increased, need to figure out the reasoning behind that

2. Focus specifically on each of the balance-related management assertions for the inventory account; briefly explain identified risks for the inventory accounts that require further attention, if any:

a. Existence

i. All items in the inventory account must actually exist. Auditors themselves need to physical count the goods and not rely on management assertions

b. Completeness

i. All inventories need to be recorded completely

c. Valuation

i. Laramie Wire needs to use on valuation technique to be consistent. It’s the auditors responsibility to make sure this is happening

d. Rights and obligations

i. Inventory on consignment should not be recorded, should instead be recorded by the consignor.

Case 8.1: Laramie Wire Manufacturing

1. Analytical procedures to help identify risky areas that indicate the need for further attention during the audit, if any:

a. Why are their more inventories than last year

b. IPO projected for next year  look closely at revenues to make sure what they get for their IPO value is accurate

c. Figure out why days sales in receivables increased so much

d. COGS increased, need to figure out the reasoning behind that

2. Focus specifically on each of the balance-related management assertions for the inventory account; briefly explain identified risks for the inventory accounts that require further attention, if any:

a. Existence

i. All items in the inventory account must actually exist. Auditors themselves need to physical count the goods and not rely on...