Which of the following is the best audit procedure for the discovery of damaged merchandise in a client's ending inventory?
A) Compare the physical quantities of slow-moving items with corresponding quantities of the prior year.
B) Observe the condition of merchandise and raw materials during the client's physical inventory count.
C) Review the management's inventory representation letter for accuracy.
D) Test overall fairness of inventory values by comparing the company's turnover ratio with the industry average.

Question

Quizplus · Accepted Answer

Observing the condition of merchandise and raw materials during the physical inventory count is the best way to discover damaged merchandise in the client's ending inventory. This involves physically inspecting the inventory to identify any items that appear to be damaged, which can then be further investigated and potentially written off or adjusted in the financial statements. The other options do not specifically address the discovery of damaged merchandise and are less likely to be effective in identifying this type of issue.

Which of the Following Is the Best Audit Procedure for the Discovery