If most companies in the industry use FIFO inventory valuation and straight- line depreciation, and the audit client uses weighted average and double- declining balance, comparisons of client and industry data:
A) will enable the auditor to spot irregularities but not errors.
B) will be a meaningful highlight of the result of these differences in accounting methods.
C) will enable the auditor to spot errors but not irregularities.
D) may not be meaningful.

Question

Quizplus · Accepted Answer

Since the client is using different inventory valuation and depreciation methods than the industry standard, comparisons between the client and industry data may not be directly comparable or meaningful. Therefore, the auditor cannot meaningfully identify irregularities or errors based solely on these differences.

If Most Companies in the Industry Use FIFO Inventory Valuation