MSG use a perpetual inventory system which updates the stock levels every time an item is bought or sold. On year end, the manager prints out a full stock list for each location showing: Stock code Quantity on hand Location of stock Cost per unit At year end, a physical stocktake was carried out by MSG staff at the four MSG locations. All physical inventory items are checked against the inventory system printouts and any discrepancies are noted and provided to the warehouse manager who updates the stock levels in the accounting system. On June 30, the inventory on hand in the accounting system shows total inventory cost over the four locations is $23,500,000. The physical stocktake shows a physical inventory count of $23,100,000, the level of materiality set for inventory is 3%.

a. You are to gather sufficient and appropriate evidence regarding the existence and completeness for inventory. Describe the type of tests you would carry out for each of these assertions.

b. Discuss how you would select a sample size for testing the existence and completeness assertions. You must support your reasoning with the available literature.