Lynn’s Photos sells memory cards for digital cameras on the Internet, by catalog, and in numerous retail stores. The items are sold with a 30-day money-back guarantee. A new model becomes available at least every six months, making the previous model more difficult to sell.
a. Describe the risks associated with the audit of this inventory at year-end.
b. What evidence should the auditor gather to determine whether the inventory is materially misstated at year-end?