Question

When auditing a customer's inventory, auditors should be concerned with the detection of damaged and obsolete goods.

a) Why are auditors worried about detecting damaged and obsolete products?
b). How do auditors check damaged goods in the customer's inventory?
c) How do auditors test obsolete goods in the customer's inventory?

Answer 1

A. Auditors are worried about detecting damaged and obsolete products because the net realizable value of these goods in most cases is notably lesser than the cost of these products.

B. It can be done in the following two ways:

*Inquiring client personnel

* Observing the physical inventory of the client .

C. Auditors test obsolete goods by:

1. Reviewing perpetual inventory records,

2.Through analytical procedures such as ratio calculations for example inventory turnover

3. Inquiring client personnel.

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