Just before its year end, Home Lodders Ltd, appointed your firm as its auditor. The company buys and sells a range of ladders suitable for both the professional construction industry and the amateur home decorator. The company is owned and managed by Mrs Brent who took over the running of the company on the death of her husband 10 years ago, Home Ladders reports a small profit each year. You attended the inventory count on the last day of the financial year and performed various test counts with satisfactory results. However, late in the day you noticed several suppliers' trucks carrying inventory for delivery coming in to the warehouse and about the same time several Home Ladders' trucks leaving No the warehouse carrying inventory despatched for delivery to customers. record was made of these last-minute inventory movements. The warehouse staff who had been conducting the count had left. Mrs Brent told you to ignore the matter since the suppliers' deliveries probably amounted to the same as the despatches to customers. She also said that when the same thing had happened last year, the previous firm of auddors were not concemed and, anyway, the amounts involved were not significant in terms of total inventory moving through the warehouse in the year. In one comer of the warehouse, you noticed that there were a large number of ladders marked as 'defective' or 'unsafe'. Although they looked in good condition to you, Mrs Brent explained that these ladders would have to be written off because they could not be returned to the supplier who had gone out of business. In another comer of the warehouse, you discovered a very expensive sports car. It was brand new. Mrs Brent explained that she was storing it for a friend. Next to the warehouse, Home Ladders has a trade counter where customers place their orders. Most pay in cash because Mrs Brent gives a good discount compared to prices charged for credit card sales. Mrs Brent deals with all sales noting cash takings on a small pad of paper. Required a) What concerns do you have about Mrs Brent's responses to your queries and the things that you noticed in the warehouse and their possible impact on the financial statements? (15 marks) b) What possible audit tests could you perform in response to your concems and what would be your options if your tests did not provide satisfactory assurance? (10 marks)