Consider the failure to apply the lower of cost or market valuation to year end inventory as reported in the chapter for American Tissue a What happens to the financial statements when inventory is overstated Do outsiders receive information that is relevant and reliable b What management assertion...

a When inventory is overstated outsiders think the company will generate higher cash flows in the fu ...

Consider the failure to apply the lower-of-cost-or-market valuation to year-end inventory as reported in the chapter for

Question:

Consider the failure to apply the lower-of-cost-or-market valuation to year-end inventory as reported in the chapter for American Tissue.
a. What happens to the when inventory is overstated? Do outsiders receive information that is relevant and reliable?
b. What management assertion is violated when the company fails to record the adjustment to inventory?
c. Design a substantive audit procedure that an auditor could use to determine whether inventory is correctly valued at lower of cost of market at year-end.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...