12-40

You are an audit manager of the rapidly growing CPA firm of Raye and Coye. You have been placed in charge of three new audit clients, which have the following inventory features:

I . Canyon Cattle Co., which maintains 15,000 head of cattle on a 1,000-square-mile ranch, mostly unfenced, near the south rim of the Grand Canyon in Arizona.

2. Rhoads Mfg. Co., which has raw materials inventories consisting principally of pig iron loaded on gondola freight cars on a siding at the company's plant.

Required:

3. Strawser Company, which is in production around the clock on three shifts, and which cannot shut down production during the physical inventory.

What problems do you anticipate in the observation of physical inventories of the three new clients, and how would you deal with the problems?