Auditors Sometimes Use Ratios as Audit Evidence

question 83

Multiple Choice

Auditors sometimes use ratios as audit evidence. For example, an unexplained increase in the ratio of gross profit to sales may suggest which of the following possibilities?

• A)Fictitious purchases.
• B)Fictitious sales.
• C)Selling and general expenses erroneously being recorded as merchandise purchases.
• D)Unrecorded sales.

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Definitions:

Integrity

The quality of being honest and having strong moral principles; moral uprightness.

Coping

Adaptive thinking or behavior aimed at reducing or relieving stress that arises from harmful, threatening, or challenging conditions.

Problem-focused

A coping mechanism that involves directly addressing the cause of stress in a practical way.

Emotion-focused

A coping strategy that involves reducing the emotional distress associated with a situation.