One of the most common sources of misstatement in financial statements is the:
A)use of alternating inventory costing methods.
B)failure to appropriately estimate the market value of inventory.
C)failure to report stock issues appropriately.
D)incorrectly calculating the inventory turnover ratio.

Question

Quizplus · Accepted Answer

Failure to appropriately estimate the market value of inventory can lead to misstatement in financial statements by either over or under-valuing inventory, which affects financial ratios such as Gross Profit Margin and Inventory Turnover Ratio. Alternating inventory costing methods, reporting stock issues appropriately, and correctly calculating the inventory turnover ratio are all important aspects of inventory accounting but are not as common sources of misstatement as estimating inventory value.

One of the Most Common Sources of Misstatement in Financial