On January 10, 19X8, you were engaged to audit the financial statements of Caten Equipment Corporation for the year ended December 31, 19X7. Caten has sold trucks and truck parts and accessories for many years but has never had an audit. The company maintains good perpetual records for all inventories and takes a complete inventory each December 31. The parts inventory account includes the \($2,500\) cost of obsolete parts. Caten's executives acknowledge that these parts have been worthless for several years, but they have continued to carry the cost as an asset. The amount of \($2,500\) is material in relation to 19X7 net income and year-end inventories but not material in relation to total assets or capital at December 31, 19X7. 

1. List the procedures you would add to your inventory audit program for new trucks because you did not observe the physical inventory taken by the corporation as of December 31, 19X7. 

2. Should the \($2,500\) of obsolete parts be carried in inventory as an asset? Discuss. 

3. Assume your alternative auditing procedures satisfy you as to the corporation's December 31, 19X7 inventory but that you were unable to apply these alternative procedures to the December 31, 19X6 inventory. Discuss (ignoring the obsolete parts) the effect this would have on your auditor's report in (1) the scope paragraph and (2) the opinion paragraph.