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Inventory Valuation refers to the process by which a business assigns monetary value to its inventory for financial reporting purposes. This involves applying appropriate accounting principles, such as the lower of cost or net realizable value method, to determine the inventory's worth at any given time. The external audit plays a critical role in ensuring that the valuation is accurate and complies with relevant regulations and standards. Inventory Valuation provides important insights into a company's financial health, including its ability to meet customer demand and generate revenue. It also helps businesses make informed decisions about inventory management, production planning, and pricing strategies.