Which of the following is the best audit procedure for the discovery of damaged merchandise in an entity's ending inventory?
A)Compare the physical quantities of slow-moving items with corresponding quantities of the prior year.
B)Observe the condition of merchandise and raw materials during the entity's physical inventory count.
C)Review the management's inventory representation letter for accuracy.
D)Test overall fairness of inventory values by comparing the company's turnover ratio with the industry average.

Question

Quizplus · Accepted Answer

Observing the condition of merchandise and raw materials during the physical inventory count is the best audit procedure for discovering damaged merchandise in an entity's ending inventory. This allows the auditor to physically verify the condition of the inventory and identify any damaged or unusable items. Comparing physical quantities of slow-moving items or testing overall fairness of inventory values would not necessarily uncover damaged merchandise, and reviewing the inventory representation letter is not a specific procedure for identifying damaged inventory.

Which of the Following Is the Best Audit Procedure for the Discovery