Financial Audit and Laramie Wire Manufacturing Essay

1244 Words Aug 16th, 2010 5 Pages
Case Study Assignment Prepare written answers to the following case from Auditing Cases: An Interactive Learning Approach, (3rd edition), by Beasley, Buckless, Glover, and Prawitt: Case 8.1: Laramie Wire Manufacturing: Using Analytical Procedures in Audit Planning


1. 1. Perform analytical procedures to help you identify relatively risky areas 2. indicate the need for further attention during the audit, if any.
2. Focus specifically on each of the five management assertions (existence or occurrence, completeness, valuation or allocation, rights and obligations, and presentation and disclosure) for the inventory account. Focus specifically on each of the five management
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Laramie is a medium-sized company that buys copper rod and plastic materials used to make insulated copper wiring. Laramie operates out of a single building complex totaling 500,000 square feet, which includes office space (3%), production area (57%), shipping and receiving (15%), and finished goods and raw materials inventory warehousing (25%). Laramie supplies insulated copper wiring in the northeastern part of the United States. The company has a good reputation for quality products and has had a good working relationship with its outside accountants over the past 10 years. You have been assigned responsibility for auditing Laramie’s inventories. You are in the planning stages of the audit, and you are preparing to conduct some analytical procedures to help you identify risk areas that may require further attention.
Your staff assistant assembled information relating to inventories and other items, including a brief description of Laramie’s production and inventory areas. Because your assistant is new, he is usually not very good about weeding out irrelevant information, so you may not need to use every piece of information he has provided. The information is listed below. 2005 2004
Sales $8,450,000 $8,150,000
Cost of Sales $6,242,500 $6,080,000
Finished Goods Inventory $1,654,500 $1,175,500 (Approx. 300 million ft.--2002)
Copper Rod Inventory $2,625,000 $1,650,000 (Approx.

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