When Performing Planning Analytical Procedures for a Client the Auditor

question 26

Multiple Choice

When performing planning analytical procedures for a client the auditor detected that the gross profit percentage had declined by 50% from the previous year to the year currently under audit. The auditor should:

• A) investgate the possibility the client may have made an error in their cost of goods sold computation.
• B) assist management in developing greater cost efficiencies in their product line.
• C) prepare a going concern opinion for the client.
• D) advise the client to have extensive disclosure to alleviate investor concerns.

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Definitions:

360-Day Year

An accounting convention that uses 360 days in a year for calculating interest on loans and other financial instruments.

Commission

A service charge assessed by a broker or agent for providing assistance in the execution of a transaction.

Accrued Interest

Interest that has been earned but not yet paid.

Semiannually

Occurring twice a year, typically used in the context of payments, interest calculations, or reports.