Nortel tried to find a solution to the hundreds of millions of dollars of invent

Question

Nortel tried to find a solution to the hundreds of millions of dollars of inventory sitting in its warehouses. The external auditors might have discovered this red flag with which of the following analytical procedures?

Inventory growth is higher than revenue growth combined with increasing inventory turnover

Inventory shrinkage is lower than revenue growth combined with increasing inventory turnover

Inventory growth is higher than revenue growth combined with decreasing inventory turnover

Inventory shrinkage is lower than revenue shrinkage combined with decreasing inventory turnover

Explanation / Answer

Answer is Inventory growth is higher than revenue growth combined with decreasing inventory turnover.

Decreasing inventory turnover means less sales and high stock

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