During the month of April, you are engaged to audit the balance sheet of a new client as of March 31. The client manufactures steel casting and forgings. A physical count of all inventories is made at the end of each quarter of the fiscal year, and the company adjusts its inventory book amounts to reflect the physical counts. As you were not engaged at the time of the physical inventory on March 31, you request that the company make another physical inventory count at the end of April in order that you may observe and make test counts. The client agrees, and another inventory is taken on April 30 which you witness. Inventories of raw materials, work in process, and finished goods totaled \($125,000\) at March 31. Total current assets amounted to \($188,000,\) total current liabilities were \($186,000,\) and total assets were \($450,000.\) The company maintains perpetual inventory records of raw materials and supplies, but has no job cost system or perpetual records of work in process or finished goods. Production records are kept in the plant showing the tons of castings poured each day, and sales records reflect the tons of castings and forgings sold daily to various customers of the company. 

1. What audit procedures would you use to satisfy yourself as to the quantities on hand at balance sheet date? 

2. Assuming that the results of your tests of inventories are satisfactory, would you issue an audit report unqualified as to opinion and scope of the audit, in view of the fact that you were not on hand to observe inventories at March 31? Give reasons for your answer. (Limit your discussion to a consideration of the inventory problem.)