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As new auditor of Lowie Co you note that the company's gross profit percentage as per the draft accounts has fallen from 30% in the previous year to 20% in the current year. Which of the following explanations do you consider to be the most plausible? A. Errors in computation led to the opening inventory being overvalued and this has been compounded by the inclusion for the first time (so as to comply with IAS 2 Inventories) of indirect overheads in the closing inventory valuation. B. Errors in computation led to opening inventory being overvalued and the company has also increased sales as a result of a marketing drive based on undercutting competitors. C. Errors in computation have caused opening inventory to be undervalued and this has been compounded by the inclusion for the first time (so as to comply with IAS 2 Inventories) of indirect overheads in the closing inventory valuation. D. Errors in computation led to opening inventory being undervalued and margins have fallen as a result of the entry into the market of a major new competitor. |