An Abnormal Fluctuation in Gross Profit That Might Suggest the Need

question 77

Multiple Choice

An abnormal fluctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the risk assessment phase of the audit by the use of:

• A)Tests of transactions and balances.
• B)An assessment of internal control.
• C)Specialized audit programs.
• D)Analytical procedures.

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Definitions:

Liability Account

An accounting record of amounts owed to creditors, representing claims against the company’s assets.

Voucher System

A control process in accounting where vouchers are used to authorize and record transactions before payments are made.

Internal Control

Processes and procedures implemented by a company to safeguard assets, enhance the reliability of financial reports, and ensure compliance with laws and regulations.

Information

Data that is processed, organized, structured, or presented in a given context to make it meaningful and useful.