As part of audit planning,you have calculated gross margin for the last five years and compared gross margin to industry averages.Your client's gross margin has increased by about 5% in the current year,while the industry gross average has declined.One possible cause of this increased gross margin is
A)higher cost of goods sold.
B)increased bad debt expenses.
C)fictitious revenue.
D)fictitious expenses.

Question

Quizplus · Accepted Answer

Fictitious revenue could artificially inflate a company's gross margin by increasing sales without a corresponding increase in cost of goods sold, which would not be the case with higher costs, increased bad debt expenses, or fictitious expenses.

As Part of Audit Planning,you Have Calculated Gross Margin for the Last