9-XYZ Company purchased Inventory on 1st January, 2018 worth OMR 10,000. The company decided to issue the inventory under LIF0 method. But in the year 2020 the company decided to change the method to FIFO as per the suggestion from Production Manager as a result of which the profit after tax of the company is declined by OMR 1,000. Name the variation in the profit due to change in the method of inventory valuation. O a. Inherent risk O b. Detection risk O c. Control risk O d. Audit Risk

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A: Basic Concept of Valuation of Inventory

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Q: None

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.