An auditor noted that client sales had increased 10 percent for the year.At the same time,cost of goods sold as a percentage of sales had decreased from 45 percent to 40 percent and year-end accounts receivable had increased by 8 percent.The auditor is most likely concerned about
A) Unrecorded costs.
B) Improper credit approvals.
C) Improper sales cut-off.
D) Fictitious sales.

Question

Quizplus · Accepted Answer

The increase in sales and accounts receivable, along with a decrease in cost of goods sold as a percentage of sales, may indicate that sales are being overstated, possibly through fictitious sales.

An Auditor Noted That Client Sales Had Increased 10 Percent