What is the first step that the auditor takes when auditing the valuation of inventory?
A)Conduct analytical review,comparing gross margin for the current year to the prior year.
B)Do an industry analysis to determine whether there is a potential for technology-induced obsolescence.
C)Ask the client about the level of obsolete inventory that was on hand and counted during the inventory count.
D)Clearly establish the valuation method used and how the calculations are being performed.

Question

Quizplus · Accepted Answer

The first step that the auditor takes when auditing the valuation of inventory is to clearly establish the valuation method used and how the calculations are being performed. This helps the auditor understand the basis of how inventory is being valued and helps identify any potential misstatements or errors. Analytical review, industry analysis, and asking about obsolete inventory levels are all important steps in auditing inventory, but are typically done after the valuation method has been established.

What Is the First Step That the Auditor Takes When