During a Review of a Division's Operations, an Internal Auditor

question 169

Multiple Choice

During a review of a division's operations, an internal auditor notes that sales and customer base are unchanged, while inventory and gross margin have increased significantly. Which of the following audit procedures would be most relevant in substantiating management's assertion that the gross margin increase is due to increased efficiency in manufacturing operations?

• A) Obtain a physical count of inventory.
• B) For a sample of products, compare costs-per-unit this year to those of last year, test cost build-ups, and analyze standard cost variances.
• C) Take a physical inventory of equipment to determine if there were significant changes.
• D) Select a sample of finished goods inventory and trace raw materials cost back to purchase prices in order to determine the accuracy of the recorded raw materials price.

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Definitions:

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