As a result of analytical procedures conducted during the planning phase, the independent auditor determines that the gross profit percentage has declined from 30% in the preceding year to 20% in the current year. The auditor should:
A)Express an opinion that is qualified due to the inability of the company to continue as a going concern.
B)Evaluate management's performance in causing this decline.
C)Require footnote disclosure.
D)Consider the possibility of an error in the financial statements.

Question

Quizplus · Accepted Answer

The decline in gross profit may indicate a possible error in the financial statements. The auditor should investigate the cause of the decline and test for the possibility of fraud or error. Further audit procedures and inquiry may be needed to ensure the accuracy and completeness of the financial statements.

As a Result of Analytical Procedures Conducted During the Planning