An Abnormal Fluctuation in Gross Profit That Might Suggest the Need

question 60

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) An audit time budget.
• D) Analytical procedures.

---

Definitions:

Common Shares

Ownership in a corporation represented by equity shares, which grant holders the right to vote and a portion of the company's earnings.

Investing Activities

Financial transactions involving the purchase and sale of long-term assets and other investments not included in cash equivalents.

Open Market

A system where the trading of goods or securities is conducted in such a way that prices are determined by supply and demand.

Common Shares

Equity securities that represent ownership in a corporation, providing voting rights and potential dividends.