In the audit of Nampak Ltd you perform extensive ratio and trend analysis. No material exceptions are discovered except that the inventory turnover rate (calculated as cost of goods sold divided by average inventory) has increased from the preceding year.

Required:

Identify two management assertions of inventory accounts that could be misstated, and briefly provide one example of how each assertion could be misstated. An example is provided to illustrate the requirement. Please note that this example is unrelated to the question and is provided for illustrative purposes only. (4 marks)

Example: Occurrence - Sales can be overstated by recording sales that belong to the next accounting period in the current accounting period