Farmco Limited (Farmco), a privately owned apple farm, is highly debt leveraged. Two loans from XYZ Bank are currently outstanding: a long-term loan that is secured by the farm's land, building structure and equipment; and, a short¬ term demand loan that is secured by unharvested apples valued at net realizable value. Farmco also leases some of the farming equipment from a local supplier. It is now one month before the harvesting of the apples. The bank has given you a special assignment to assess the adequacy of the security for Farmco's loans.

Required Discuss which audit procedures you would carry out in completing this assignment and why.