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)premature revenue recognition.
D)fictitious expenses.

Question

Quizplus · Accepted Answer

Premature revenue recognition can artificially inflate revenue figures without a corresponding increase in costs, leading to an increased gross margin. This discrepancy, especially when contrasted with industry trends, can be a red flag for auditors.

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