An inventory turnover analysis is useful to the auditor because it may detect:Select one:a.the optimum automatic reorder points.b.methods of avoiding cyclical holding cost.c.inadequacies in inventory pricing.d.the existence of obsolete merchandise.
Question
An inventory turnover analysis is useful to the auditor because it may detect:Select one:a.the optimum automatic reorder points.b.methods of avoiding cyclical holding cost.c.inadequacies in inventory pricing.d.the existence of obsolete merchandise.
Solution
The correct answer is d. the existence of obsolete merchandise.
Inventory turnover analysis is a useful tool for auditors because it can help detect obsolete merchandise. This analysis measures how often a company's inventory is sold and replaced over a certain period of time. If the turnover rate is low, it could indicate that the company has items in its inventory that are not selling, which could be due to obsolescence. This could potentially lead to overstatement of the inventory's value on the company's balance sheet. Therefore, a thorough inventory turnover analysis can help auditors identify these issues.
Similar Questions
The auditors will usually trace the details of the test counts made during the observation of the physical inventory taking to a final inventory schedule. This audit procedure is undertaken to provide evidence that items physically present and observed by the auditors at the time of the physical inventory count are:Select one:a.owned by the clientb.not obsoletec.physically present at the time of the preparation of the final inventory schedule.d.included in the final inventory schedule
For inventory turnover, what data will be used, including how the data can be collected if necessary.
Which of the following statements correctly explains what the inventory turnover ratio assesses.Multiple choice question.The inventory turnover ratio assesses what percentage of a company's assets are tied up in its inventory.The inventory turnover ratio assesses the company's ability to generate a profit from the sales of its inventory.The inventory turnover ratio assesses whether management is doing a good job controlling the amount of inventory.
A high inventory turnover may indicateAn efficient use of the investment in inventory.A high risk of stock-outs.A low profit margin.Option 1 and Option 2 are correct.
An audit program for inventory includes the following procedure:“Test count a sample of physical inventory and agree to management’s count records.”"Observe the arrangements of the client's management before the inventory count." "Select goods received notes for a few days before the count date and confirm that they are recorded and existed as "goods in" in inventory records. The corresponding goods should be included in the purchase in trade payables.""Obtain written representations concerning the completeness and accuracy of the physical count and valuation."Which of the above procedure is not included at the time of attending the physical stock take.<br /> A. a. 2 <br />B. b. 4 <br />C. c. 3 <br />D. d. 1
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