Which is the BEST audit procedure for the discovery of damaged merchandise?
A) Review the management's inventory representation letter for accuracy.
B) Be alert for items that are located in inappropriate places while observing the client's physical inventory count.
C) Test overall fairness of inventory values by comparing the company's turnover ratio with the industry average.
D) Compare the physical quantities of slow-moving items with corresponding quantities of the prior year.

Question

Quizplus · Accepted Answer

Being alert for items that are located in inappropriate places while observing the client's physical inventory count is the best audit procedure for the discovery of damaged merchandise. By observing the physical inventory count, the auditor can identify items that are in the wrong location or are in damaged condition, thereby identifying damaged merchandise. Reviewing the management's inventory representation letter for accuracy or testing overall fairness of inventory values may not necessarily detect damaged merchandise. Similarly, comparing the physical quantities of slow-moving items with corresponding quantities of the prior year may not identify damaged merchandise.

Which Is the BEST Audit Procedure for the Discovery of Damaged