a) Explain the materiality principle and its importance to the auditor.

b) Identify the four forms of audit opinion and the circumstances in which each is to be used, as set out in International Standards on Auditing.

Premium Precious Ltd buys, processes and resells gold, silver, platinum and other precious metals. The value of these can be as high as 50 per gram. The average value of all stock, including work in progress, is about 25m. Commodity prices change daily. There are separate stores for unprocessed and processed stock. Security systems are thought by management to be extremely tight and management tell you that a theft has never taken place. The new Chief Executive is not willing to give you direct access to the stock on the grounds of security.

The unaudited financial statements show an inventory figure of 23.815m and a net profit of 7.803m.

c) Prepare a letter to the Chief Executive explaining why you need direct access to the stock for the purposes of your audit of the financial statements and the potential consequences for the audit engagement if this is not provided.