Management projects significant margin expansion to justify avoiding impairment despite four consecutive years of declining margins.Which action best demonstrates professional skepticism?

Warranty liability is estimated using historical claim rates. After year-end, claim activity increases materially. Management argues the increase is unrelated to year-end conditions.Under AS 2501, which approach is most directly relevant?

The engagement team observes the following year-over-year changes:* DSO increased 18 days* DIO increased 22 days* Cash flow from operations declined despite revenue growth* DPO increased significantly* The company entered into short-term borrowings near year-endManagement describes these changes as “temporary growth-related investment.”Which conclusion is most appropriate from an audit risk perspective?

Revenue bundles are allocated using internally developed standalone selling prices that exceed observable historical pricing.What is the primary concern?

Management begins capitalizing software costs previously expensed; operating margin improves with no operational change.What is the primary audit concern?

Revenue grows while receivables grow faster and cash flow from operations declines. Management expects collections to normalize next quarter.What is the most appropriate auditor response?

A company records gross revenue for marketplace transactions, even though it does not bear inventory risk and has limited pricing discretion.Which ASC 606 issue is most directly implicated?

Post-year-end warranty claims contradict management’s year-end estimate. Management asserts the spike is an anomaly unrelated to year-end conditions.Which AS 2501 approach applies most directly?

The auditor lacks confidence in management’s complex goodwill model due to inconsistent assumptions and limited supporting evidence.Which AS 2501 approach is most appropriate?

What is the function of the in-text citation?