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) investigate 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.

Question

Quizplus · Accepted Answer

A significant decline in gross profit percentage could indicate an error in cost of goods sold calculation. Therefore, the auditor should investigate the possibility of errors in the computation of cost of goods sold that could have caused such a huge decline.

When Performing Planning Analytical Procedures for a Client the Auditor