AZO Co. currently uses a periodic inventory system. Mr. Sohaim, the owner, is considering

the purchase of a computer system that would make it feasible to switch to a perpetual

inventory system. Mr. Hasan is unhappy with the periodic inventory system because it does

not provide timely information on inventory levels. Mr. Hasan has noticed on several

occasions that the store runs out of good-selling items, while too many poor-selling items

are on hand. Mr. Hasan is also concerned about lost sales while a physical inventory is being

taken. AZO Co. currently takes a physical inventory twice a year. To minimize distractions,

the store is closed on the day inventory is taken. Mr. Hasan believes that closing the store is

the only way to get an accurate inventory count.

1. Will switching to a perpetual inventory system strengthen AZO Co.'s control over

inventory items?

2. Will switching to a perpetual inventory system eliminate the need for a physical

inventory count?

3. How IAS-2 is applicable here?