Final answer:
It is true that an auditor should inquire further when analytical procedures reveal unusual fluctuations in the sales and collection cycle, to understand the causes and assess the risk of material misstatement.
Step-by-step explanation:
When an auditor performs analytical procedures during an audit, these procedures are used as a tool to understand the financial statements and identify any unusual transactions or fluctuations. If such fluctuations are found, especially in the sales and collection cycle, it is absolutely true that the auditor should inquire further. This step is critical for the auditor to gain an understanding of the nature of these fluctuations and to assess the risks of material misstatement. This inquiry can uncover reasons such as accounting errors, unauthorized transactions, or changes in accounting policies, all of which may have implications for the financial statements.
Typically, management would provide explanations, and the auditor will evaluate the reasonableness of those explanations. If the explanations are not satisfactory or further clarification is required, the auditor might escalate the inquiry to higher levels of management or consider additional evidence through further audit procedures.