This is one of the many ratios used by auditors in ratio analysis. As with other ratios, the auditor compares the actual value of the ratio at a point of time with the expected value of the ratio.
Any unexpected change is investigated.
To avoid the actual value of the ratio biasing the auditor's estimation of the expected value, auditors estimate the expected value before calculating the actual value. Depending on the nature of the client's business, and changes to it during the year, small variations in the gross profit percentage may or may not be significant. Large variations, however, will always require investigation. By itself, the ratio does not convey alot of meaning. Comparison of the ratio provides more meaningful information.