Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Early in your first audit of Star Corporation, you notice that sales and year end inventory are almost unchanged from the prior year. However, cost
Early in your first audit of Star Corporation, you notice that sales and year end inventory are almost unchanged from the prior year. However, cost of goods sold is less than the previous year and accounts payable are down substantially. Gross profit has increased, but this increase has not carried hrough to net income as executive salaries have increased significantly. Management informs you that sales prices and purchase prices have not changed during the past year and that there have not been any new product Star relies on the periodic inventory method. Your initial impression is that internal controls may have several weaknesses. Suggest a possible explanation for the trends described, especially the decrease in Accounts Payable while sales and inventory were constant and gross profit increased. Explain fully the relationships involved
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started