An Auditor Compared the Current-Year Gross Margin with the Prior-Year

question 73

Multiple Choice

An auditor compared the current-year gross margin with the prior-year gross margin to determine if cost of sales is reasonable. What type of audit procedure was performed?

• A) Test of transactions.
• B) Analytical procedures.
• C) Test of controls.
• D) Test of details.

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Definitions:

Upward Counterfactual

involves imagining or thinking about how a situation could have turned out better than it did, often leading to feelings of regret.

Downward Counterfactual

Imagining how situations could have been worse, which can sometimes improve emotional state by making one's current situation seem better in comparison.

Magical Thinking

The belief that one's thoughts, words, or actions can achieve specific effects in the real world in ways that defy the conventional laws of cause and effect.

Primacy Effect

The tendency to remember information at the beginning of a list better than the information in the middle or the end.