Which of the following identifies audits used for inventory management and determining accurate shrinkage levels?

The identification of inventories and determining accurate shrinkage levels are specifically addressed through inventory audits. These audits focus on examining the stocks held by a business, assessing whether they match the records, and identifying discrepancies that could point to issues like theft, errors, or mismanagement. By conducting inventory audits, businesses can accurately understand their inventory levels, pinpoint actual shrinkage—loss of products for various reasons—and implement corrective measures to enhance their loss prevention strategies.

Financial audits primarily focus on the overall financial statements of an organization, assessing accuracy and compliance with accounting standards rather than specifically looking at inventory management. Performance audits evaluate the effectiveness and efficiency of operations within a given area, but do not delve specifically into inventory practices. Operational audits assess the entire operational processes of an organization and may touch on inventory indirectly, but they are broader in scope and not solely focused on inventory shrinkage or management. Therefore, inventory audits are the most pertinent and specialized method for accurately determining inventory levels and understanding shrinkage within a business context.