Question

3. “The company’s auditors will work hard to attest to the value of the cost of goods sold but because it is a summary number, it is not useful for internal decision-making.” Do you agree with that statement? Why or why not?

Answer 1

No I do not agree with the statement. The auditing in the business is generally done to make sure that the interest of the shareholders is protected and the company is following the law of the land but this does not mean that the auditing does not help the internal management of the company. The auditors when assessing the value of any goods or inventory they follow the pre-described process by the regulators or the standard set. When auditors are valuing the cost of goods sold or inventory the management can use this as a feedback for better inventory management system where the higher level of sales can be achieved and the spoilage of goods can be reduced. It also helps in cost management as to how much of the sales is attributed to direct cost of the goods and how much is attributed to the indirect expenditure. Auditors also give their feedback about the company inventory management that can also be used to improve the process.