In order to detect large errors, a company can use the gross profit method to test for the overall reasonableness of an ending inventory amount.

Question

Quizplus · Accepted Answer

The gross profit method can be used to estimate an ending inventory amount, but it is not a foolproof method and may not catch all errors. However, it can give an indication of whether the ending inventory amount is reasonable or not, by comparing it to the estimated amount calculated using the gross profit method. If there is a significant difference between the two amounts, it may indicate a large error in the ending inventory amount.

In Order to Detect Large Errors, a Company Can Use