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Preparing for an audit of the retail footwear division

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Reference no: EM132465238

Question 1: In preparing for an audit of the retail footwear division of a major retail organization, the auditor gathered the following information about the organization's stores:

 

All

Stores

Northeast Region

Southwest Region

Mid-Central Region

Average sales per store

$736,000

$840,000

$760,000

$630,000

Average cost of goods sold per store

$375,000

$420,000

$325,000

$395,000

Number of stores

48

13

18

17

Average square feet per store

1,800

2.200

1,850

1,550

Average sales per full-time employee

$137,000

$152.000

$140,000

$122,000

Average wage related expense per store

$98,000

$102,000

$82,000

$112,000

Average net profit contribution per store

$238,000

$285.000

$320,000

$115,000

Problem 1: An auditor performs analytical procedures that involve comparing the gross margins of various divisional operations with those of other divisions and with the individual division's performance in previous years. The auditor notes a significant increase in the gross margin at one division. The auditor does some preliminary investigation and also notes that there were no changes in products, production methods, or divisional management during the year. Based on the above information, the most likely cause of the increase in gross margin would be:

Multiple Choice

  1. An increase in the number of competitors selling similar products.
  2. A decrease in the number of suppliers of the material used in manufacturing the product.
  3. Correct .- An overstatement of year-end inventory.
  4. An understatement of year-end accounts receivable.

Reference no: EM132465238

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