Which of the following is an example of how an analytical procedure may be helpful in identifying accounts and assertions that are likely to contain misstatements?
A) An improvement in the current ratio combined with an increase in the quick ratio.
B) An increase in gross sales combined with an increase in earnings per share.
C) Susceptibility of misappropriation.
D) An increase in gross margins combined with an increase in the number of inventory turn days.
E) Difficult-to-audit accounts or transactions.

Question

Quizplus · Accepted Answer

Analytical procedures involve comparing financial information with expected patterns or trends. An increase in gross margins combined with an increase in the number of inventory turn days could indicate issues such as overvaluation of inventory or incorrect recording of cost of goods sold, thus helping identify potential misstatements.

Which of the Following Is an Example of How an Analytical