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Mason CPAs is completing the audit of Dixon LLC, a provider of cement and other building materials in the southeastern United States.The current year's audit

 

image text in transcribed Mason CPAs is completing the audit of Dixon LLC, a provider of cement and other building materials in the southeastern United States.The current year's audit is the second year that Mason CPAs have provided attestation services for Dixon LLC. One of Mason's auditstaff associates has determined that Dixon's 'days in inventory' ratio has increased substantially since last year's audit. Which of the following is the most likely reason for this change? O Anincrease in this ratio is usually indicative of increased sales by the client. As demand for the client's products increases, this ratio typically also increases.O Anincrease in this ratio may be due to a decrease in demand for the client's products, which is causing inventory to turnover more slowly thanin the prior year. This should be investigated by the auditors.O Anincrease in this ratio is most likely due to the client's customers returning abnormally large amounts of inventory to the client. Such returns increase inventory and cause this ratio to also increase. O None of these answer choices are correct.

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