Consider the purchases function of a manufacturing company. To overcome a downward profitability trend, management recently instituted a "just-in-time" system of acquiring raw materials for its manufacturing operations. Under this system, raw materials are inventoried in real time-through a bar-coding tracking system-so that orders can be generated to their suppliers automatically whenever the inventories reach a specific point. The best approach is to order the materials at just the right time to ensure an adequate stock for manufacturing operations but without tying up scarce capital in inventory.

Discuss how the new just-in-time inventory system will affect the predictive power of preliminary and substantive analytical procedures on the receiving function (e.g., the purchases account). Will it make analytical procedures more or less effective at identifying risk and potential misstatement in the purchases process? Why?