C. Everest Co (Everest) manufactures a wide range of fast-moving consumer goods. The company's year-end is 30 November 2019 and the forecast profit before tax is 9.5 million. You are the audit manager of Henley & Co and the year-end audit is due to commence in January. The following information has been gathered during the planning process: Inventory count Everest's raw materials and finished goods inventory are stored in 12 warehouses across the country. Each of these warehouses is expected to contain material levels of inventory at the year end. It is expected that there will be no significant work in progress held at any of the sites. Each count will be supervised by a member of Everest's internal audit department and the counts will all take place on 31 December, when all movements of goods in and out of the warehouses will cease. Research and development Everest spends over 2 million annually on developing new product lines. This year it incurred expenditure on five projects, all of which are at different stages of development. Once they meet the recognition criteria under IAS 38 Intangible Assets for development expenditure, Everest includes the costs incurred within intangible assets. Once production commences, the intangible assets are amortised on a straight line basis over five years. Required: (i) Describe and evaluate audit testing and internal control procedures you would perform in the audit of Everest Co: (a) BEFORE and DURING the inventory counts; and (10 marks) (b) In relation to research and development expenditure. (8 marks) (ii) During the audit, the team discovers that one of the five development projects, valued at 980,000 and included within intangible assets, does not meet the criteria for capitalisation. The finance director does not intend to change the accounting treatment adopted as he considers this an immaterial amount. Required: Discuss the issue and describe the impact on the audit report, if any, if the issue remains unresolved (4 marks) Total Marks (30)