When an auditor discovers a significant change in a ratio when compared with the prior years ratio,

Question:

When an auditor discovers a significant change in a ratio when compared with the prior year’s ratio, the auditor considers the possible reasons for the change.

Required:

A. Give the possible reasons for the following significant changes in ratios:

B. The number of days’ sales in receivables (ratio of average of daily accounts receivable to sales) has increased over the prior year.

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...