Question: 3-3. When analytical procedures disclose unexpected changes in financial relationships relative to prior years, the auditors consider the possible reasons for the changes. Please explain
3-3. When analytical procedures disclose unexpected changes in financial relationships relative to prior years, the auditors consider the possible reasons for the changes. Please explain and give several possible reasons for the following significant changes in relationships:
a. The rate of inventory turnover (ratio of cost of goods sold to average inventory) has declined from the prior years rate.
b. The number of days sales in accounts receivable has increased over the prior year.
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