Which one of the following analytical procedures would be most helpful in alerting the auditor to the possibility of obsolete inventory?
A) Compare current year manufacturing costs with previous years' costs.
B) Compare gross margin percentage with previous years' percentages.
C) Compare inventory turnover ratio with previous years' ratios.
D) Compare unit costs of inventory with previous years' costs.

Question

Quizplus · Accepted Answer

Comparing the inventory turnover ratio with previous years' ratios would be most helpful in alerting the auditor to the possibility of obsolete inventory. A decrease in the inventory turnover ratio compared to previous years could indicate an increase in obsolete inventory. Option A, B, and D may not specifically indicate or address the possibility of obsolete inventory.

Which One of the Following Analytical Procedures Would Be Most