In a 2-3 page paper, complete the case below and submit to instructor. Review the income statement for Uden Supply Company and answer the following:
- Describe the purpose of analytical procedures performed in the planning stage of the audit.
- Uden Supply has projected its 2004 gross profit at 31% of sales despite expectation for some shrinkage in margins. On the basis of Uden’s operating performance in years 2001 – 2003 project your best guess for 2004. Project 2004 based on the incremental changes for each line item over the last three years.
- Uden’s unaudited financial statements for the current year show a 31 percent gross profit rate. Assuming that this represents a misstatement from the amount that you developed as an expectation, calculate the estimated effect of this misstatement on net income before taxes for 20X4.
- Indicate whether you believe that the difference calculated in part (c) is material. Explain your answer. (50-100 words).
Comparative income statement information for Uden Supply Company is presented in the accompanying table.