[sush412]

Hey All,

I was just reviewing MCQ’s and SIMS for the AUD exam. I came across a few SIMS that deal with ratios. I have made flash cards for ratios, so that i can remember them. However, I am struggling with why ratio’s increased or decreased. I can figure out the ratio, but am getting the explanation as to why it increased or decreased incorrect. Can someone please HELP???????????? Exam is on Saturday and i just want to understand and practice it before i go out there. HELLPPP

[jlg2010]

sush412 the key is to take this step by step. If you are doing, e.g. inventory turnover, write out the formula….COGS/Ave inventory. The question will then give you a scenario, e.g. the ratio is 6 (before correcting for improper accounting). Then you know that based on simple math COGS will have had to gone up (if both go up COGS goes up more than ave inv inventory since the ratio is over 1) or if ave inventory will have had to go down (if both go down ave inventory goes down more than COGS since the ratio is over 1). Then try and figure out what info would make the ratio make sense. You may see that cosigned inventory was erroneously included in ending inventory. To correct this, ave inventory will obviously go down, and the ratio will be increased from 6. I think the key is to write the formula down and work it in steps…it is very easy to miss a step and get it wrong.

FAR Aug 12 84
Aud Feb 13 99
BEC Apr 13 86
Reg May 13 87 Done!!!

[Author]

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