An Auditor Noted That Client Sales Had Increased 10 Percent

question 7

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 interviewed the sales manager who stated that the increase in sales without a corresponding increase in cost of goods sold was due to a price increase enacted by the company during the year. How would the auditor best test the sales manager's representation?

• A)Perform additional inquiries with sales personnel.
• B)Obtain copies of all price lists in use during the year and vouch the prices to sales invoices.
• C)Send confirmations asking customers about unit prices paid for product.
• D)Vouch vender invoices to payments made after year-end.

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Definitions:

Interior Walls

Walls located within a building or structure, dividing spaces into rooms or sections.

Effervesces

Reacts with acids to release carbon dioxide gas, often indicating the presence of carbonate minerals like calcite.

Metallic Luster

A type of shine from the surface of a mineral that resembles the appearance of polished metal, indicating a certain mineral composition.

Dilute HCl

A solution made by mixing hydrochloric acid with water, commonly used in chemical analysis and experiments to test for the presence of carbonate minerals.