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 planning phase of the audit by the use of
A) Tests of transactions and balances.
B) A preliminary review of internal controls.
C) Specialized audit programs.
D) Analytical procedures.

Question

Quizplus · Accepted Answer

Analytical procedures involve comparing financial data from different periods or industry benchmarks to identify any unusual fluctuations or trends. In this case, an abnormal fluctuation in gross profit would be identified through an analytical procedure during the planning phase of the audit. This would then lead to the need for extended audit procedures for sales and inventories to determine the cause of the abnormal fluctuation.

An Abnormal Fluctuation in Gross Profit That Might Suggest the Need