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Auditing and Assurance service

However, due to lack of assessing the net realisable value with fair degree of accuracy, firms often stick to using cost as the main method of valuing inventories.
For a firm working in Information Technology such as Dynamic Data, the issue of valuing inventories at cost or net realizable values is critical because the industry is highly volatile and dynamic in nature with technology becoming obsolete at much higher speed as compared to other traditional goods. Thus there are different factors which compel firms to use cost as the basis of valuing their inventories and reporting them into their financial statements.
As discussed in the case study that there are some news articles which indicate that the technology used in different products by Dynamic Data may be good enough to serve the current needs however, they are adequate enough to meet future demands therefore there are chances that their market value may come down very fast. ...Show more

Summary

Valuing Inventory is one of the most senstive tasks to be performed by organizations as they can esaily be singled out to use so called creative accounting while valuing inventory to manipulate their profits. However, changing the valuation methods of inventory does not necessarily change the economic reality faced by the organization however the impact of inventory valuation methods on the taxes paid by the firms, their impact on the profitability are some of the fact that suggest that inventory valuation methods may not be as simple as they may seem…
Author : zmueller
Auditing and Assurance service essay example
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