The lower-of-cost-or-market test by the auditors is generally designed to assure that inventories are valued at or above their net realizable values.

Question

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The lower-of-cost-or-market test is designed to ensure that inventories are valued at the lower of their historical cost or market value, not to assure they are valued at or above their net realizable values. This is to prevent overstating the value of inventory on the balance sheet.

The Lower-Of-Cost-Or-Market Test by the Auditors Is Generally Designed to Assure