Management has explained the decline in cost of goods sold as involving:

• Lower purchase accounting charges, primarily reflecting fair value adjustments relating to acquired inventory that was subsequently sold

• Lower costs related to new cost reduction and productivity initiatives, as well as savings generated from ongoing productivity initiatives to streamline the supply chain network

• Reduced manufacturing volumes related to products that lost exclusivity in various markets

• The impact of favorable foreign exchange rates of 3%.

• Explain the types of ratio analysis that you could conduct in substantive analytical procedures to test the validity of management’s explanations.