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

Question

Quizplus · Accepted Answer

Comparisons between the client and industry data may not be meaningful because the client is using different accounting methods (LIFO and double-declining balance) compared to most companies in the industry (FIFO and straight-line depreciation). This affects the comparability of data and may not provide meaningful highlights of the result of these accounting method differences.

If Most Companies in the Industry Use FIFO Inventory Valuation