Which Analytical Procedure Would Be Most Helpful in Alerting the Auditor

question 28

Multiple Choice

Which analytical procedure would be most helpful in alerting the auditor to the possibility of obsolete inventory? Compare

• A) current year manufacturing costs with previous years' costs.
• B) gross margin percentage with previous years' percentages.
• C) inventory turnover ratio with previous years' ratios.
• D) unit costs of inventory with previous years' costs.

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Definitions:

Illusory Correlation

The cognitive mistake of perceiving a relationship between two variables even when none exists.

Confirmation Bias

The tendency to search for, interpret, and remember information in a way that confirms one’s preconceptions or hypotheses.

Therapy

A treatment intended to relieve or heal disorders, typically involving a systematic process of interaction with a therapist.

Antisocial Personality Disorder

A mental condition in which a person consistently shows no regard for right and wrong and ignores the rights and feelings of others.