You are testing inventory. You determined that inventory exists, nothing is missing from inventory, the calculations are done correctly, the valuation of the inventory is done properly, the inventory is also properly classified and presented in the financials. Can you be reasonably certain that the inventory is not materially misstated? Explain?
You are testing inventory. You determined that inventory exists, nothing is missing from inventory, the calculations are done correctly, the valuation of the inventory is done properly, the inventory is also properly classified and presented in the financials. Can you be reasonably certain that the inventory is not materially misstated? Explain?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
You are testing inventory. You determined that inventory exists, nothing is missing from inventory, the calculations are done correctly, the
Expert Solution
Step 1
The following are some examples of inventory risks:
- Due to the difficulty of valuing inventory, it may be misrepresented.
- To boost profit, inventory may be deliberately inflated.
- It's possible that inventory is overstated to hide unauthorised removal of valuable items.
- The firm is not allowed to write off outdated or damaged inventory.
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