An Auditor Noted That Client Sales Had Increased 10 Percent

question 7

Multiple Choice

An auditor noted that client sales had increased 10 percent for the year. At the same time, cost of goods sold as a percentage of sales had decreased from 45 percent to 40 percent and year-end accounts receivable had increased by 8 percent. The auditor interviewed the sales manager who stated that the increase in sales without a corresponding increase in cost of goods sold was due to a price increase enacted by the company during the year. How would the auditor best test the sales manager's representation?

• A)Perform additional inquiries with sales personnel.
• B)Obtain copies of all price lists in use during the year and vouch the prices to sales invoices.
• C)Send confirmations asking customers about unit prices paid for product.
• D)Vouch vender invoices to payments made after year-end.

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Definitions:

Moratorium Statuses

A phase in Erikson's psychosocial development where an individual explores various identities and choices, but has yet to make definitive commitments.

Self-Identity

An individual's understanding and perception of themselves, including their beliefs, characteristics, and attitudes.

Ethnic Minority Groups

Groups that have distinct cultural, religious, or linguistic characteristics which differ from the majority population.

Adolescents

Young people in the transitional stage from childhood to adulthood, typically ranging in age from around 13 to 19 years.