Misstatement of inventories or cost of good sold can be detected by:

Answer will be C) Cost of good sold divided by inventories

answer C  is the correct answer 

Thanks for your responses

The answer is

Cost of goods sold divided by gross sales

Answer (c). Inventory turnover is one of the analytical methods that we use to identify whether inventory is overstated and cost of good sold is understated if the ratio is low.

answe c is the answer.........

 

(correct answer is (c 

Misstatement of inventories or cost of good sold can  be detected by Cost of good sold divided by   inventories because this give us inventory turnover.

 If inventory turnover low, It mean there is a problem...... 

A) Cost of good sold divided by gross sales. all other answers have no meaning to verify whether the COS or inventory is overstatement or not. COS/Sales must have almost all a fixed percentage, since the COS and the sales figures are variable in nature but the COS/Sales % must be fixed. therefore when the percentage have changed, this means that there is something wrong in the sales figures and/or COS figures and/or inventory figures.

option C is correct.............................

There is always a known mark-up amount over inventory cost which would lead to sales figure. Therefore, if the sales amount is assumed correct then COGS must represent a WELL KNOWN percentage from Sales. If this percentage is NOT as expected then something wrong with COGS or INVENTORY amount. Answer A is the relevant correct one. Other answers are remote. Thanks.

 Very good question The answer is no. (c)

 

 

Answer: C) Cost of good sold divided by inventories 

This two accounts are vital in inventory turnover computation. Any abnormalities in the turnover indicates a miscalculation of the two accounts.