Annual Audit Manual
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7069.3 Planning and Executing Tests of Inventory Lower of Cost or Net Realizable Value
Jun-2020
In This Section
OAG Guidance
We organize the procedures that we may perform to verify appropriate valuation of inventory at lower of cost or net realizable value (NRV) into the following steps:
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Understand and evaluate the nature and types of inventory and the related market
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Determine the approach to test management’s estimate of lower of cost and net realizable value
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Determine the cost of the inventory
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Test management’s determination of net realizable value of inventory, including evaluation of excess or obsolete inventory
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Determine if inventory is recorded at lower of cost and net realizable value