10 key ratio

such differences could be troublesome for auditors of transatlantic entities containing parents or subsidiaries in each continent, where legal resource and allowable liability limits differ. the purpose of this article are to discuss the abandoing of interpretation 101-16/ describe some effects of interpretation 507-8 and compare and contrast global approaches to limiting accountants ' liability throug the use of engagement letter. rule 101 interpret thta indemnification agreements remove a major stimulus to objective and unbiased consideration of problem encountered in an egagement. regulator wants to retain the right to pursue recovery of losses against auditors of failed institutions ' safety and soundness.
AICPA members providing audit or other attestation services for banking, insurance, and other regulated industries would be discrediting the profession if they used restricted clauses in engagement letters.
Crazy Eddie

1. Compute key ratios and other financial measures for Crazy Eddie during the period 1984-1987. Identify and briefly explain the red flags in Crazy Eddie 's financial statements that suggested the firm posted a higher-than-normal level of audit risk.

Current Ratio (1987-84): 2.41, 1.40, 1.56, 0.93
Quick Ratio (1987-84): 1.40 , 0.60, 0.77, 0.15
Inventory Turnover (1987-84): 3.23, 4.38, 5.13, 5.88

Inventory Turnover ratio shows how often goods are bought and sold per year. Higher numbers indicate that the funds tied up in inventory are being used more efficiently. Examining Crazy Eddie 's Inventory Turnover ratio it is obvious that the ratio is decreasing. This means that the inventory is sitting on the shelve longer. In the period of the explosive growth of the industry and accelerating sales numbers decreasing inventory turnover is unexpected and should have raised a red flag during the audit process.

2. Identify specific audit procedures that might have led to the detection of the following accounting irregularities