An inventory turnover analysis is useful to the auditor because it may detect
A) Inadequacies in inventory pricing.
B) Methods of avoiding cyclical holding costs.
C) The optimum automatic reorder points.
D) The existence of obsolete merchandise.

Question

Quizplus · Accepted Answer

An inventory turnover analysis would be useful in detecting the existence of obsolete merchandise, as a low inventory turnover ratio could suggest that the company is carrying too much inventory that is not selling and may become outdated or obsolete.

An Inventory Turnover Analysis Is Useful to the Auditor Because