ABC company manufactures and sells a variety of furniture. You are leading the internal audit

department and you are about to commence the audit on the inventory. The financial statements show

profit before tax of $21 million and total assets of $97 million.

ABC company launched a new brand of office furniture called XYZ furniture in December 2020 but sales

has been lower than expected and the directors are considering a discounted sales price. ABC

company's products are valued using a standard costing method and the standard cost comprises raw

material, labor cost and production overheads. As at 31st of March 2021, XYZ furniture products with

standard cost of $ 5.6 million were included as finished goods in inventory. The year end is 30th of June

2021.

Calculate the materiality of the matter and describe the procedures the auditor should perform to

obtain sufficient and appropriate audit evidence in relation to the inventory of ABC company.