An abnormal fluctuation in gross profit that might suggest the need for extended audit procedures for sales and inventories would most likely be identified in the risk assessment phase of the audit by the use of:
A)Tests of transactions and balances.
B)An assessment of internal control.
C)Specialized audit programs.
D)Analytical procedures.

Question

Quizplus · Accepted Answer

Analytical procedures are used in the risk assessment phase of an audit to identify any abnormal fluctuations or patterns in financial statement data. By comparing current year data with prior year data and industry benchmarks, auditors can identify any areas of potential risk and decide whether extended audit procedures are necessary. Tests of transactions and balances, an assessment of internal control, and specialized audit programs would not provide the same level of insight into abnormal fluctuations in gross profit.

An Abnormal Fluctuation in Gross Profit That Might Suggest the Need