Case Study Analysis Logan Self storage
Part A
Question no 1:
Answer: Total estimated revenues = 460000*1.10*90%*226.09
Total estimated revenues = 102,961,386.
The difference in the amount could be because the substantive analytical procedures are based on weighted average methods.
Question no 2:
Answer: No the reported rent revenue does not appear to be fairly stated because of its difference from the estimated amount calculated is greater than the materiality threshold i.e. 1 million.
Question no 3:
Answer: The effectiveness and efficiency of substantive analytical procedures are influenced by factors like nature of assertion, predictability or plausibility of relationships, availability and reliability of information to make expectations and precision of expectations.
The term precision of expectations refers to keep the expectations very precise so that the estimations of differences are very narrow in range.
Question no 4:
Answer: As in this part there was no specific information given like the no. of units, there per unit occupancy or revenue per square foot, in all type of storage units from different locations around U.S. With the help of such specific information, the accuracy of estimations could be maximized.
Part B
Question no 1:
Answer: Based on the excel calculations the estimated revenues are $104,191,720.96.
Note: Refer to exhibit 1 for calculations
Question no 2:
Answer: No, the stated revenue is still not fairly stated as compared to the expectation from the previous question it is because its difference from the reported revenue for 20X8 is still more than the materiality threshold i.e., 1 million.
Question no 3:
Answer: Although there are misstatements in the reported revenue by the company but there is the difference between calculations from both question it could be because in one question, we have used averages and in another one we have used specific information for calculations.
Question no 4:
Answer: The key factors that affect the level of disaggregation required to perform substantial analytical procedures are the objective of the procedure and the detailing of the level at which these processes are to be performed.
Question no 5:
Answer: The factors like tests of details, analytical procedures and their combination regarding the data could affect the level of reliance to be placed on substantive analytical procedures.
Exhibits
Exhibit 1
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