ACCA Audit and Assurance (F8) Practice Exam

The age of inventory is a significant factor that indicates potential inaccuracy in the valuation of finished goods. As inventory ages, it can become obsolete or less desirable to consumers, which can lead to a decline in its market value. If finished goods are not sold within a reasonable time frame, the company may need to write down the value of these goods to reflect their lower realizable value, thereby impacting the overall financial statements.

In addition, older inventory may also indicate issues with production efficiency or demand forecasting, further complicating accurate valuation. Consequently, auditors will often consider the age of inventory when assessing the accuracy of finished goods valuation, ensuring that the reported amounts reflect current market conditions and realizations.

Other factors like sales tax discrepancies, supplier discounts, and payment terms may affect cash flow or profit margins but are less directly related to the valuation of inventory. Sales tax discrepancies could lead to issues with compliance but do not directly influence how inventory is valued. Supplier discounts may improve overall cost efficiency but do not inherently affect the market value of existing finished goods. Payment terms relate to cash management and liabilities rather than directly influencing valuation accuracy.