An inventory turnover analysis is useful to the auditor because it may detect:
A)Inadequacies in inventory pricing.
B)Methods of avoiding cyclical holding cost.
C)The optimum automatic reorder points.
D)The existence of obsolete merchandise.

Question

Quizplus · Accepted Answer

An inventory turnover analysis helps the auditor to identify the inventory turnover rate and the age of inventory. This analysis can help detect the existence of obsolete merchandise in the inventory. If the inventory turnover rate is low, or if there are slow-moving items, it may indicate that the inventory is not selling well, and there could be obsolete goods in the inventory. The other options (A, B, and C) are irrelevant to the purpose of an inventory turnover analysis in detecting obsolete merchandise.

An Inventory Turnover Analysis Is Useful to the Auditor Because