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'.

Question

Quizplus · Accepted Answer

Comparing the inventory turnover ratio with previous years can alert the auditor to the possibility of obsolete inventory because a decrease in the ratio may indicate that inventory is not being sold as quickly as it has in the past, potentially due to obsolescence. The other options may provide useful information, but may not directly relate to identifying obsolete inventory.

Which One of the Following Analytical Procedures Would Be Most