Which of the Following Is a Correct Statement Regarding Analytical

question 27

Multiple Choice

Which of the following is a correct statement regarding analytical procedures?

• A) A major strength in using industry ratios for auditing is the difference between the nature of the client's financial information and that of the firms making up the industry totals.
• B) Common-size financial statements display all items as a percentage change from a base year.
• C) In identifying areas of specific risk, the auditor is likely to focus on the liquidity activity ratios.
• D) In order to look for a misstatement in the allowance for bad debts, the auditor should divide gross sales by sales returns and allowances.