Auditors Sometimes Use Comparison of Ratios as Audit Evidence

question 2

Multiple Choice

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

• A) Unrecorded sales.
• B) Merchandise purchases charged to selling and general expense.
• C) Fictitious sales.
• D) Unrecorded purchases.

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Definitions:

Economic Conditions

The state of the economy at a given time, including factors like unemployment rates, inflation levels, and gross domestic product (GDP).

Suicide Rates

indicate the number of suicides occurring within a given population and time frame, often per 100,000 individuals annually.

Biological Predispositions

The inherent tendencies or propensities individuals have towards certain behavior or diseases due to their genetic make-up.

Society Responds

The collective reactions or adaptations of a community or society to events, trends, or challenges.