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During the audit of Ballantyne Enterprises, the audit team of Ray CPA Firm has noted that the client has a noticeably higher gross margin on
During the audit of Ballantyne Enterprises, the audit team of Ray CPA Firm has noted that the client has a noticeably higher gross margin on sales than in prior periods. A meeting has been convened to discuss this issue and invite any suggestions from the audit team as to why the client's gross margin is noticeably higher. Which of the following constitutes the most plausible reason for this? The notably higher gross margin is probably industry-wide, and as a result, there is nothing untoward occurring at the client's place of business that needs further investigation. O The unusually high gross margin could be a result of one or more employees laundering client funds. When this type of scheme occurs, it often shows up in notably higher gross margins. O The reason for the unusually high gross margin is probably due to the client increasing demand for its products. When sales revenue accounts, gross margins would also increase, so there is nothing worthy of further investigation here. O None of these answer choices are correct
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