Which one of the following analytical procedures would be most helpful in alerting the auditor to the possibility of obsolete inventory?
A)comparing gross margin percentage with previous years
B)comparing unit costs of inventory with previous years
C)comparing inventory turnover with previous years
D)comparing current year manufacturing costs with previous years

Question

Quizplus · Accepted Answer

Comparing inventory turnover with previous years would be most helpful in alerting the auditor to the possibility of obsolete inventory. If inventory turnover has decreased significantly in comparison to previous years, it may indicate obsolete inventory or slow-moving inventory, which can lead to potential write-offs or adjustments in the valuation of inventory. Comparing gross margin percentage or current year manufacturing costs with previous years may not necessarily indicate obsolete inventory, while comparing unit costs may not capture the impact of changes in sales volume.

Which One of the Following Analytical Procedures Would Be Most