Auditing Inventory Valuation

Question 1

What should auditing the valuation of inventory aim to do? (method)

Answer 1

Ensuring the method of determining cost and the allocation of overheads is appropriate

Question 2

What should auditing the valuation of inventory aim to do? (inventory)

Answer 2

Confirming inventory is carried at the lower of cost and net realisable value

Question 3

What does estimating the net realisable value of inventory require?

Answer 3

Judgment and can involve uncertainty

Question 4

What does ISA 540 mention?

Answer 4

Inventory obsolescence is an example of an accounting estimate