Inventory obsolescence procedures Identify and describe at least four procedures the audit team may perform in order to determine potential obsolescence of items in the inventory balances
Below are seven audit procedures that may be performed by the audit team for determining obsolete inventory items:
1 . Noting potential obsolete inventory when observing the client's physical inventory.
2 . Calculating inventory turnover, number of days' sales in inventory, date of last sale or purchase, and other similar analytic techniques to identify potential obsolescence.
3 . Calculating net realizable value for products by referring to current selling prices, cost of disposal, sales commissions, and so on.
4 . Monitoring trade journals and the Internet for information regarding the introduction of competitive products.
5 . Inquiring of management about its approach to identifying and classifying obsolete items.
6 . Comparing current sales with budgeted sales.
7 . Adjusting for poor condition of inventory, reported as part of periodic cycle counts.
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