In obtaining an understanding of a manufacturing entity's internal control concerning inventory balances, an auditor most likely would
A) Review the entity's description of inventory policies and procedures.
B) Perform test counts of inventory during the entity's physical count.
C) Analyze inventory turnover statistics to identify slow-moving and obsolete items.
D) Analyze monthly production reports to identify variances and unusual transactions.

Question

Quizplus · Accepted Answer

Reviewing the entity's description of inventory policies and procedures helps the auditor understand the internal controls related to inventory management, which is crucial for assessing the effectiveness of those controls.

In Obtaining an Understanding of a Manufacturing Entity's Internal Control