You are the auditor of JHG Ltd, a manufacturing company. This company maintains records of all stock issued and received, valued at standard cost. The computerised accounting system identifies the standard quantities and prices of each component contained in each item sold during the year and values these at their standard cost. The company plans to hold a stock count at its year end. There are fifteen depots spread across the country.

(a) Suggest how the auditor should go about deciding which depots to visit during the stock count.

(b) Identify the audit problems which would arise if the results of the physical stocktaking suggested that stocks were valued at £90,000 but the book stocks were worth £130,000. Assume that the £40,000 difference is material. Does it matter whether the company uses the. book stock or the physical stock valuation?