One (25 marks) You are the manager in charge of the annual audit of the financial statements of ABC Limited, a manufacturer of electronic home appliances, for the year ending 31 December 2020. You have just received a copy of ABC Limited's stocktake instructions. You are in general satisfied with ABC Limited's stocktake instructions except for the following inventory movements on 31 December 2020. Other than the immaterial amount of raw materials, work-in-progress and finished goods in the manufacturing plant, all inventory is stored in ABC Limited's own warehouse, next to the manufacturing plant. The manufacturing plant will operate on 31 December 2020. On 30 December 2020, the warehouse will deliver to the plant the estimated quantities of raw materials required for the production on 31 December 2020. There will not be any inventory in or out of the manufacturing plant on 31 December 2020 until the completion of the stocktake. Raw materials will continue to be received and finished goods will continue to be shipped during the inventory count on 31 December 2020. The receiving bay and the shipping bay are located in the covered front yard of the warehouse. Same as last year, ABC Limited will use count sheets to record the counting results during the stocktake and you have planned to attend the stocktake of ABC Limited on 31 December 2020. Required: (a) (b) (c) (d) Without referring to the information above, list and briefly explain six key factors that commonly contribute to the risk of misstatement in the assertions for inventories. (Note: Only the first six key factors and the first 120 words will be marked.) (6 marks) Explain why you should read and understand the ABC Limited's stocktake instructions before attending ABC Limited's year-end stocktake. (Note: Only the first 120 words will be marked.) (5 marks) What procedures will you suggest ABC Limited to establish to make sure that all inventory is counted and that nothing is counted twice given that there is inventory movement during the count? (Note: Only the first 150 words will be marked.) (6 marks) Identify four different assertions related to the year-end inventory that you would verify while attending ABC Limited's stocktake. Describe an audit procedure for verifying each of the assertions identified that you will perform when attending ABC Limited's stocktake. (Note: Only the first four assertions and the first audit procedure in respect of each assertion will be marked.) (8 marks)