During the performance of analytical procedures on Lollipop Company's financial ratios, Blueberry, the auditor assigned, noticed that the inventory turnover days was significantly higher than the industry average. Because of this variance, Blueberry decided to inquire with the finance manager of Lollipop regarding possible explanations. Which justification provided by the finance manager should Blueberry mostly rely on in assessing risk of material misstatement of inventories?

A.As compared to other players in the same industry, Lollipop is smaller in size. That is why we have longer inventory turnover days.

B.Lollipop Company uses a different accounting method than the majority of our competitors. That is why our inventory amount reported is lower and is thus giving us a higher inventory turnover in days.

C.Lollipop Company was the defendant in a lawsuit for the year being audited. This led to poor sales performance and low inventory turnover.

D.We have a lot of obsolete inventories as we have introduced new products recently. However, we already have a plan to dispose of these obsolete inventories

Answer rating: 100% (QA)

Lollipop is smaller than other participants in the same business We hav... View the full answer