Which One of the Following Analytical Procedures Would Be Most

question 45

Multiple Choice

Which one of the following analytical procedures would be most useful in alerting the auditor to the possibility of obsolete inventory?

• A)Compare gross margin percentage with previous years'.
• B)Compare unit costs of inventory with previous years'.
• C)Compare inventory turnover ratio with previous years'.
• D)Compare current year manufacturing costs with previous years'.

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Definitions:

Fraud

Deliberate deception to secure unfair or unlawful gain, or to deprive a victim of a legal right.

Employee Fraud

Dishonest activities conducted by employees to provide them with an advantage, financial or otherwise, at the expense of their employer.

Inventories

Goods and materials that a business holds for the purpose of resale or production.

Manufacturers

Manufacturers are entities engaged in the transformation of raw materials or components into finished goods that are sold to consumers, businesses, or other manufacturers.