1. The profit margin is going up. What might cause this that is legitimate? What might cause this that is not right? How would you audit these two possible causes?

2. Return on assets is dropping. The client indicates that this is because of the increase in new assets purchased. How would you corroborate this explanation?

3. The depreciation expense as a percent of sales is much higher than the industry average. What might cause this that is legitimate? What might cause this that is not right? How would you audit these two possible causes?

4. Why must the auditor understand the business to make the best use of analytical procedures?