Auditing Assignment Example | Topics and Well Written Essays - 1000 words

Auditing - Assignment ExampleThere are many factors reported in the profit and loss account that have affected the partnerships profit. The most prominent of them being increasing cost of sales and interest expenses.The major crooks and tendencies in the companions financial position and performance for the current year as indicated by Adios Ltds financial statements can be assessed with the help of the following factorsThe companys balance sheet shows that the company has enhanced its investment in tangible asset by 84% whereas the investment in the intangible assets of the company has been reduced by 80%. further overall as compared to the previous year, the companys investment in total assets has been increased.Working keen is the capital, which remains with the company after accounting for all the current liabilities of the company out of its current assets. This capital is required by every company to meet its short-term obligations or liabilities without any hassles, when ever a need arises. Working capital can be obtained by subtracting a companys current liabilities from its current assets. The Adios Ltds total current liabilities are about 25% of its total current assets, which shows a good working capital position for the company.The companys fiIncreased Long-term BorrowingsThe companys financial statements indicate that the companys long-term debts and borrowing has been increased to a great extent. As compared to the previous year, the companys long-term debts have been increased by about 7 times. Consequently, the companys interest expense has also been 6 times more than that of the previous year.Increased Sales concord to the Adios Ltds profit and loss account, the companys total sales are increased by 11.46% as compared to the previous year. Simultaneously, the companys cost of sales has also increased by 55%, which has resulted into a decline in the companys gross profit margin. Adios Ltds gross profit margin was about 55% in the year 2004 , which has reduced to 23% in 2005 despite of an increase in companys sales. Decreased ProfitThe companys profit margin for the year 2005 has declined by 30% as compared to that of the year 2004. society has shown many factors responsible for this in the financial statements. The most prominent of which being the increasing cost of sales and increasing interest expense resulting from an increasing trend in the companys long-term debts and borrowings.INFORMATION IMPORTANT TO BE ASKED BY AN AUDITORAn auditor needs to obtain the following information from the companys management in rule to gain a better insight of companys financi