Internal controls related to Cash Payments
Read Take-Two Interactive Software, Inc. in Knapp cases and discuss on the following questions.
Discussion Questions
1. Using the financial statements data in Exhibit 1, compute the following financial ratios for Take-Two Interactive and Software and discuss what major “red flags”, if any were present in Take-Two’s financial statements given these ratios. The following financial ratios are often used to assess the risk. Age of Accounts Receivable, Age of Inventory, Gross Profit percentage, Profit Margin percentage, Return on assets, Return on equity, Current ratio, Debt-to-equity ratio, and Quality-of-earnings ratio. The formulas for these ratios are provided here .
2. Identify audit tests that may be used as alternative audit procedures when a response is not received for a positive confirmation request. Discuss the quality of audit evidence yielded by these alternative procedures compared to that produced by audit confirmation procedures.
Instructions:
Read the given discussion questions carefully and provide your response to every question thoroughly, but succinctly, taking a position on the given discussion topics, supporting your argument or suggestions.
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