The Controller Who Had Been with Bianca Limited for Six

question 32

Essay

The controller who had been with Bianca Limited for six years was fired last month,allegedly for pocketing cash.Unfortunately,there was a fire in the accounting department the week before he was fired,which destroyed the accounting records,including the computer equipment and current backup disks.The only records available for the current year is a copy of the computer system that is a month old.There are also disks for the year-ends going back three years.These were at the president's home,the place where the company kept archival records.
Required:
Explain how this situation might affect the audit process.

Understand the self-correcting nature of inventory errors over time.

Grasp the advantages and implications of using different inventory costing methods (LIFO, FIFO) under varying cost conditions.

Learn the application and significance of the lower-of-cost-or-market method for inventory valuation.

Comprehend the concept and calculation of net realizable value in inventory valuation.