Day: August 31, 2026

Lucy, an audit junior, has carried out the following tests to verify the valuation of inventory in the financial statements of Alex Manufacturing Ltd.

For the case described below: select whether the test proves the assertion of valuation, does not prove the assertion of valuation, it depends on the type of company, or needs to be referred to a senior colleague.

• Comparing cost on several inventory items to sales invoices after the year end

Select ONE answer:

1. It depends on the type of company
2. Needs to be referred to a senior colleague
3. Does not prove valuation
4. Proves valuation

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct – Checking inventory items against sales invoices tests for NRV and hence valuation of the inventory.

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