An Example of Auditor Using Disaggregated Data to Increase the Precision

question 39

True/False

An example of auditor using disaggregated data to increase the precision of the auditor's expectations using substantive analytical procedures in the audit of inventories would be to calculate gross margin by product line, rather than calculating the total gross margin for total sales in the planning stage of the audit.

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Definitions:

Situation Assessment

The process of evaluating the current state of an environment, context, or situation, to inform decision-making and strategic planning.

Value Chain Analysis

A process where a company identifies its primary and support activities that add value to its final product and then analyze these activities to reduce costs or increase differentiation.

Profit Margin

Profit margin is a financial metric used to assess a company's financial health by revealing the percentage of income that remains after all expenses have been deducted from sales.

Competitor Strengths

The attributes or capabilities that give an organization an advantage over others in the competitive landscape.