An Auditor Noted That Client Sales Had Increased 10 Percent

question 46

Multiple Choice

An auditor noted that client sales had increased 10 percent for the year.At the same time,cost of goods sold as a percentage of sales had decreased from 45 percent to 40 percent and year-end accounts receivable had increased by 8 percent.The auditor is most likely concerned about

• A) Unrecorded costs.
• B) Improper credit approvals.
• C) Improper sales cut-off.
• D) Fictitious sales.

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Definitions:

Title Does Not Pass

A legal principle indicating that the ownership of a property or asset has not been transferred from the seller to the buyer, often due to certain conditions not being met.

CISG

Stands for the United Nations Convention on Contracts for the International Sale of Goods, which provides a uniform framework for international commerce.

Risk Of Loss

The potential that an investment's value may decrease, or that the property may be destroyed, damaged, or lost, impacting the holder's financial position.

Sales Contract

A legal agreement between a buyer and a seller which outlines the terms and conditions of a sale of goods or services.