An abnormal fluctuation in gross profit suggests the need for extended audit procedures for sales and inventories.This would most likely be identified in the audit risk assessment phase by utilizing:
A)Tests of transactions and balances.
B)An assessment of internal control.
C)An audit time budget.
D)Analytical procedures.

Question

Quizplus · Accepted Answer

Analytical procedures involve evaluating financial information through the comparison of current financial statements with prior periods or industry standards. Abnormal fluctuations in gross profit can be detected through analytical procedures, which can then prompt extended audit procedures for sales and inventories. Tests of transactions and balances, an assessment of internal control, and audit time budgets may also be useful in the audit risk assessment phase, but they are not specifically related to identifying abnormal fluctuations in gross profit.

An Abnormal Fluctuation in Gross Profit Suggests the Need for Extended