Homework Sourse1 a Who is primarily responsible for the content of the fina
1. a. Who is primarily responsible for the content of the financial statements – the independent auditors, management, or the company’s board of directors?
b. In general terms, what measures have been undertaken by management to ensure reliability of the statements?
2. a. How many years are covered in each of the four types of comparative financial statements?
b. Were all of these statements audited? Name the auditors.
c. What were the auditors’ conclusions concerning these statements?
3. Toys “R” Us combines its statements of retained earnings with another financial statement. Where are details about changes in the amount of retained earnings found?
4. Over the past three years, have the company’s annual net cash flows been positive or negative from:
a. Operating activities?
b. Investing activities?
c. Financing activities?
5. Has the company’s cash balance increased or decreased during each of these three years?
6. a. Why do the company’s fiscal years end on different dates (that is, January 28, January 29, and January 30)?
b. Are these fiscal years of equal length?
c. Upon what data will the company’s next fiscal year end?
7. a. What was the amount of net sales during the 4th quarter of the fiscal year ended January 28, 1995?
b. What was the percentage change in this 4th quarter’s net sales relative to sales in the 4th quarter of the prior year?
c. Comment upon the pattern of quarterly sales within the year, and offer your own explanation for this pattern.
8. What does management point out as evidence of the company’s strong financial position (liquidity)?
9. a. How many stores did the company operate at the end of the fiscal year ended January 28, 1995?
b. How many stores does it plan to open during 1995 (the next fiscal year)?
10. a. In how many foreign countries did the company’s International Division operate during 1994?
b. In what specific countries did the company begin operations in 1994?
Other Notes:
- Toys “R” Us ends its fiscal years on unusual dates. Before answering questions about this company’s financial statements, read the note Fiscal Year on page D-11 of the annual report.
- Annual reports include not only comparative financial statements, but also the following sources of information:
a. Financial highlights, a summary of key statistics for the past 5 or 10 years.
b. A letter from management addressed To Our Stockholders.
c. A discussion by management of the results of operations and the company’s financial condition.
d. Several pages of Notes that accompany the financial statements.
e. Reports by management and by the independent auditors in which they express their respective responsibilities for the financial statements.
- Answer each of the following questions and briefly explain where in the statements, notes, or other sections of the annual report you located the information used in your answer.
Solution
As per policy, only four parts of a question are allowed to answer, so answering 1 to 4 :
1 : a) The company’s board of directors (BOD) are primarily respondible for the content of the financial statements because they are the main controllers of the company and independent auditors and the management of the company are being appointed by the BOD’s orders.
1: b) The management has commented in the “Management’s discussion – Results of operations and financial condition” in detail about the reliability of the statements. The management head and Finance head has signed all the statements to show themanagements reliability and confidence in the financial statements. The management has also under the “Report of Management” has taken the responsibility for the reliability of the financial informations. Moreover, the auditors has made the reliability of the financial statements based on management’s responsibility.
2: a) Three years from 1993 to 1995 are covered in each of the four types of comparative financial statements .
2: b) Yes, as per the Auditors Report, the all the statements were audited. The name of the auditors are : M/s Ernst & Young LLP.
2: c) The auditor’s conclusions concerning the statements are that proper assurance has been provided to the auditors on the financial statements about free of any material misstatement. The audit has been made on the test basis and examining the supports and disclosures in the financial statements. The accounting principles and the estimates made by management were also audited by the auditors. The audit has been reasonable according to their opinion. The financial position is fair in all respects according to the auditors.
3: Under the “Consolidated statements of Stockholder’s equity” we will find the details about changes in the amount of retained earnings , where the retained earnings are combined with another financial statement.
4: The company’s annual net cash flows been positive or negative from:
a: operating activities : 1993: positive ; 1994: positive ; 1995: positive
b: investing activities : 1993: negative ; 1994: negative ; 1995: negative
c: financing activities : 1993: negative ; 1994: positive ; 1995: positive
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