Management has centralized purchasing and uses a model based upon previous year's sales with adjustments for trends in the market place (e.g. ,the trend to more casual shoes).A staff auditor has suggested that the centralized purchasing may be one of the reasons for the lower level of profitability in the Mid-Central Region.Which of the following would be the best single audit procedure to address the staff auditor's assertion?
A)Take a sample of receiving documents at stores and trace to purchase orders to determine the length of time between the purchase and delivery of the goods.
B)Interview store managers in the Mid-Central Region to determine their attitude toward centralized purchasing.
C)Perform an inventory count at selected stores in the Mid-Central Region and determine if adjustments are needed to the perpetual records.
D)Perform a product-line analysis of sales and purchases in the Mid-Central Region and compare with other regions.

Question

Quizplus · Accepted Answer

The best audit procedure to address the staff auditor's assertion would be to perform a product-line analysis of sales and purchases in the Mid-Central Region and compare with other regions. This analysis would help to determine whether the centralized purchasing model based on previous year's sales with adjustments for trends in the market place is leading to lower profitability in the Mid-Central Region or not. By comparing the Mid-Central Region's product line sales and purchases with other regions, the auditor could identify any significant differences and analyze why they exist. This analysis can help to understand if the centralized purchasing model needs to be adjusted or not. The other options are not directly related to the staff auditor's assertion and may not provide significant evidence to support or refute it.

Management Has Centralized Purchasing and Uses a Model Based Upon