Vinand Petroleum Case
VINAND PETROLEUM CASE
Financial statements could be examined with varied degrees, as part of the client acceptance procedures Paige CPA got to perform a horizontal and vertical analysis, and financial ratio analysis of Vinand Petroleum financial statements. These procedures are not as in depth as other procedures used by auditors on financial statements, but these procedures may show areas of concern for auditors. From 2006 to 2007, Vinand’s long term debt tripled and its interest expense paid for the year did not reflect this drastic increase. This could mean that Vinand has taken on a large amount of debt with a low interest rate, which will not bode well for the financial health of the company in the future. In the same breadth, accounts payable account did not increase from 2006 to 2007 despite a substantial increase in the inventory account. Revenue increased by a large margin in 2007, and the increase in the account receivable account was pale in comparison with sales, but even with both these developments the taxes payable account decreased.” Other liabilities” account usually denotes miscellaneous liabilities which are usually immaterial, from 2006 to 2007 this account increased from $50,000,000 to $466,000,000, the cause of this steep increase has to be investigated. Looking at Table 2 which gathers information of Oil and Gas companies from 2005 to 2007, Vinand consistently beats out the industry average by astronomical margins except in the return on sales category where Vinand sits at the industry average. In one particular instance Vinand had a percentage increase of 53.06% compared to its closest competitor which had an increase of 7.56% while the industry average was a decline of 12.75%. All these raise concerns as to how in an industry as volatile as the oil and gas, how Vinand consistently overwhelmed industry expectations. For all its exceptional performance, Vinand’s return on sales ratio borders right on the industry average. Paige CPA found
Financial statements could be examined with varied degrees, as part of the client acceptance procedures Paige CPA got to perform a horizontal and vertical analysis, and financial ratio analysis of Vinand Petroleum financial statements. These procedures are not as in depth as other procedures used by auditors on financial statements, but these procedures may show areas of concern for auditors. From 2006 to 2007, Vinand’s long term debt tripled and its interest expense paid for the year did not reflect this drastic increase. This could mean that Vinand has taken on a large amount of debt with a low interest rate, which will not bode well for the financial health of the company in the future. In the same breadth, accounts payable account did not increase from 2006 to 2007 despite a substantial increase in the inventory account. Revenue increased by a large margin in 2007, and the increase in the account receivable account was pale in comparison with sales, but even with both these developments the taxes payable account decreased.” Other liabilities” account usually denotes miscellaneous liabilities which are usually immaterial, from 2006 to 2007 this account increased from $50,000,000 to $466,000,000, the cause of this steep increase has to be investigated. Looking at Table 2 which gathers information of Oil and Gas companies from 2005 to 2007, Vinand consistently beats out the industry average by astronomical margins except in the return on sales category where Vinand sits at the industry average. In one particular instance Vinand had a percentage increase of 53.06% compared to its closest competitor which had an increase of 7.56% while the industry average was a decline of 12.75%. All these raise concerns as to how in an industry as volatile as the oil and gas, how Vinand consistently overwhelmed industry expectations. For all its exceptional performance, Vinand’s return on sales ratio borders right on the industry average. Paige CPA found