Para 2.1.17 — MSO

2.1.17 Comparison across components: This involves analysis of the relationship between more than one financial statement component. This procedure is also referred to as ratio analysis. Some examples are accounts receivable to turnover ratio, inventoryturnover ratio, gross-margin ratio, etc. This procedure may be used at both the planning and execution stages of audit. It is crucial that the definition of the ratios used is consistent with that used for prior years or with that of similar entities, as the case may be. This procedure is generally more effective than single component comparisons because it considers the inter-relationships among different components. Moreover, this procedure can provide assurance simultaneously for more than one component.