When an auditor calculates the gross margin as a percent of sales and compares it with previous periods,this type of evidence is called
A)physical examination.
B)analytical procedures.
C)observation.
D)enquiries of client.

Question

Quizplus · Accepted Answer

The auditor's calculation of gross margin as a percentage of sales and comparison with previous periods is an example of analytical procedures. These procedures involve the analysis of data and relationships to identify unusual fluctuations, ratios, or trends that might indicate potential material misstatements. This type of evidence provides a basis for the auditor to form an overall conclusion about the financial statements.

When an Auditor Calculates the Gross Margin as a Percent