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In respect of the storage of materials prior to their use in the manufacturing of car components at the Sabah factory: Gold and platinum used

In respect of the storage of materials prior to their use in the manufacturing of car components at the Sabah factory: Gold and platinum used in the manufacture of catalytic converters are not stored securely; and Poisonous chemicals used in the manufacture of car batteries are kept in open tanks in an area of the factory with unrestricted access. Your firm did not observe the counting of the inventories at 31 March 2019 and was unable to obtain sufficient appropriate audit evidence regarding the opening inventory balance of RM10.2 million. The draft financial statements for the year ended 31 March 2020 show profit before tax of RM103.9 million. Your firm is of the opinion that the statement of financial position at 31 March 2020 is fairly presented.

(i) In respect of the facts given above, highlight the internal control deficiencies, draft points for inclusion in your firm's report to those charged with governance and management of Usaha. For each deficiency, you should outline the possible consequence(s) of the deficiency and provide recommendations to address it.

(ii) Explain the implications for the auditor's report on the financial statements for the year ended 31 March 2020 of your firm being unable to obtain sufficient appropriate audit evidence in respect of the opening inventory balance.

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