The principle of lower of cost or market and the potential obsolescence of inventory are concerns for the audit team because of which of the following?
A)They are uncommon and may not exist.
B)They are a burden to the auditor in the undue amount of work caused.
C)They are likely to occur in the last month of the year and cause cutoff problems.
D)They are an inherent component of complexity related to valuation.

Question

Quizplus · Accepted Answer

The principle of lower of cost or market is a concept that requires inventory to be valued at the lower of its cost or its market value. This can be a complex valuation issue that requires significant audit attention to ensure accuracy. Additionally, the potential obsolescence of inventory is a concern because it can result in inventory becoming overvalued, which can distort financial statements. Both of these factors are inherent components of complexity related to valuation, which is a key concern for auditors.

The Principle of Lower of Cost or Market and the Potential