1. In the planning stage of an audit, auditors frequently consider certain financial ratios. For either of the following two ratios, which are at unusual levels, please state one kind of error or fraud which would explain why the ratio is at an unusual level this year. Ratio #1 The number of days of sales in accounts receivable has increased from 35 to 60. The industry average is 34. [Days of sales in accounts receivable = {ending accounts receivable /sales}*365] OR Ratio # 2 Salesmens commission expense = 4% of sales. Last year it equaled 7%.

2. Refer to the same two ratios as in the previous question. For the same ratio you discussed in the previous question, State one reason, that is not an error or fraud, which would explain why the ratio is at an unusual level this year. (This might be a business reason.)