Below is information relating to the inventory management of Quick Sell. Using analytical procedures, identify any concerns you have about misstatements in the financial statements. 2017 2018 IndustryAverageInventory$16,500 $26,250 $25,000 Inventory Turnover12 9 18
What will be an ideal response?
Inventory has significantly increased, especially when compared to the industry average. At the same time, inventory turnover is decreasing and is significantly below the industry average in 2018. The auditor should be concerned about obsolescence or excess inventory and should do additional testing to ensure the inventory is being valued properly by the entity.
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