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The Group’s operating margin has increased from 4.5% to 6.1% despite a fall in revenue of 3.7%. This is due to a reduction in operating expenses of 4.5% and increase in other operating income of 50%.
ma’am in the above case, audit risk is that: expenses are understated
rationale is which of the two?
– operating margin has increased despite a reduction in revenue OR
– reduction in operating expenses is more than reduction in revenue
They amount to the same thing. Put some numbers to it …. if % increase in expenses is less than % increase in revenue the margin must increase (because it’s based on the difference between the two and the difference is increasing).