In the inventory process,the auditor might perform the following analytical procedures
A)Compare inventory transactions by category - raw material,work-in-process,and finished goods - for the current year with the prior year.
B)Compare inventory purchases by category - raw material,work-in-process,and finished goods - for the current year with the prior year.
C)Compute gross margin for the current year and compare with the prior year.Investigate any unexpected changes in the ratio.
D)Compute cost of goods sold with the current year with the prior year.Investigate any unexpected changes in the ratio.
E)Compute inventory turnover.Compare the current year's turnover to the prior year.Investigate any differences.
F)both A and C
G)both B and D
H)Both C and E

Question

Quizplus · Accepted Answer

Option C involves computing gross margin, which is directly related to inventory. High fluctuations in gross margins could be a red flag indicating inventory mismanagement.

Option E involves inventory turnover, which gives insight into how efficiently the company is managing its inventory. High inventory turnover ratios could indicate that the company is making effective use of their inventory.

By performing both C and E, the auditor can get a better understanding of the inventory management practices of the company and identify any discrepancies.

In the Inventory Process,the Auditor Might Perform the Following Analytical