1. As the Company's consultant, purchase of those shirts by the audit team compromises on theINDEPENDENCEof the auditor and also as per the Code of Conduct, the auditor isnotsupposed to havefinancial dealingswith the client customer. Hence, as the Company's Consultant, this is high unacceptable situation jeopardizing the position of the auditor. The Company's staff may purchase since they work for the company and they are the employees of the company. The auditor is an outsider and appointed by the management / shareholders for specific purpose.

2. In this engagement, as Consultant, the company seems to have good internal controls as stated ; hence substantive tests is reduced. But in reality, inside the shop, the in charge senior has got full access to the Inventory items. so then the adequacy of internal control is INADEQUATE. There has to be a billing / recording system and invoice for sales all of which is absent.

So effectively substantive tests to be increased.