IIA Exam IIA-ACCA Topic 7 Question 86 Discussion

Actual exam question for IIA's IIA-ACCA exam

Question #: 86
Topic #: 7

During an audit of the organization's annual financial statements, the internal auditor notes that the current cost of goods sold percentage is substantially higher than in prior years. Which of the following is the most likely explanation for this increase?

ACost of raw material inventory items is decreasing.

BProcess to manufacture goods is more efficient.

CLabor productivity to produce goods is increasing.

DWrite-off of inventory is increasing.

Show Suggested Answer

Suggested Answer: A

by Carlee at Sep 17, 2024, 04:36 PM

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Erasmo

2 months ago

I bet it's A) Cost of raw material inventory items is decreasing. If the materials are getting cheaper, that could push up the cost of goods sold percentage. Just a thought.

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Cherry

2 months ago

Kenda: Interesting perspectives, let's wait and see what the final audit report reveals.

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Angella

2 months ago

I see your point, but I still think it's A) Cost of raw material inventory items is decreasing.

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Kenda

2 months ago

I disagree, I believe it's D) Write-off of inventory is increasing.

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Omega

2 months ago

I think it's B) Process to manufacture goods is more efficient.

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Josefa

2 months ago

But wouldn't a more efficient process lead to lower costs?

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Ira

2 months ago

D) Write-off of inventory is increasing. That's gotta be it. They're losing money on all that old, useless junk in the warehouse.

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Linsey

2 months ago

C) Labor productivity to produce goods is increasing.

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Jani

2 months ago

B) Process to manufacture goods is more efficient.

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Mendy

2 months ago

A) Cost of raw material inventory items is decreasing.

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Wade

3 months ago

I disagree, I believe it's C.

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Gerald

3 months ago

Hmm, I'm not so sure. I think C) Labor productivity to produce goods is increasing is the correct answer. Higher labor productivity could drive up the cost of goods sold.

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Clement

1 months ago

I see your point. It's important to consider all possible factors when analyzing the increase in cost of goods sold.

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Glenna

1 months ago

That's true, but A) Cost of raw material inventory items is decreasing could also play a role in the increase.

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Gabriele

2 months ago

I agree, but D) Write-off of inventory is increasing could also contribute to the higher cost of goods sold.

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Noel

2 months ago

I think B) Process to manufacture goods is more efficient could also be a possible explanation.

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Jules

3 months ago

I'm going with B) Process to manufacture goods is more efficient. Increased productivity and efficiency in the manufacturing process would naturally lead to a higher cost of goods sold.

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Josefa

3 months ago

I think the answer is B.

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Argelia

3 months ago

D) Write-off of inventory is increasing. This seems like the most likely explanation, as higher cost of goods sold could indicate issues with inventory management and obsolete or damaged goods.

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Tayna

2 months ago

B) Process to manufacture goods is more efficient.

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Tayna

2 months ago

D) Write-off of inventory is increasing.

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