C. 6. The company CEO notes the following changes in ratios: Last Year Current 7.3 4.2 Inventory Turnover Accounts Receivable Turnover 2.8 7.3 8% Revenue Growth 15% From just this information, the auditor should conclude all of the following about fraud risk except: a. Inventory has declined in quality because of the emphasis on increased sales. b. Accounts receivable growth may be caused by increased sales. Accounts receivable is older and may be less collectible. C. d. Revenue growth likely includes contracts that have deferred payment terms. e. The data would support a hypothesis of fictitious sales near year end. 236
C. 6. The company CEO notes the following changes in ratios: Last Year Current 7.3 4.2 Inventory Turnover Accounts Receivable Turnover 2.8 7.3 8% Revenue Growth 15% From just this information, the auditor should conclude all of the following about fraud risk except: a. Inventory has declined in quality because of the emphasis on increased sales. b. Accounts receivable growth may be caused by increased sales. Accounts receivable is older and may be less collectible. C. d. Revenue growth likely includes contracts that have deferred payment terms. e. The data would support a hypothesis of fictitious sales near year end. 236
Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter10: Auditing Cash, Marketable Securities, And Complex Financial Instruments
Section: Chapter Questions
Problem 13RQSC
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Transcribed Image Text:6. The company CEO notes the following changes in ratios:
Current
Last Year
4.2
7.3
Inventory Turnover
7.3
2.8
Accounts Receivable Turnover
8%
15%
Revenue Growth
From just this information, the auditor should conclude all of the
following about fraud risk except:
a. Inventory has declined in quality because of the emphasis on
increased sales.
b.
Accounts receivable growth may be caused by increased sales.
Accounts receivable is older and may be less collectible.
C.
d. Revenue growth likely includes contracts that have deferred payment
terms.
The data would support a hypothesis of fictitious sales near year end.
WL'1
6 ch
l
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