Question 1 Inventory A company has the following internal controls related to inventory: 1. The inventory purchasing system only allows for pre-approved vendors 2. All inventory products are stored in warehousing areas that are separated from other storage areas used to house equipment and supplies. 3. Microchips are embedded in each product and when items are removed from the warehouse a signal updates the inventory record 4. Only authorised inventory personnel are allowed in the inventory storage areas 5. On a weekly basis, accounting personnel take samples of inventory from the records and verifies with the quantities on hand in the warehouse. 6. On a weekly basis, accounting personnel take samples from items on hand in the warehouse and verifies with the records. 7. All inventory held on consignment at the company are stored in a separate area of the warehouse. Required: a. Describe the risk each control above is designed to mitigate. (14 marks) b. C. Members of a company's management may occasionally attempt to over count ending inventory. What is the rationale behind this type of irregularity? (2 marks) For the observation of physical inventory, list the actions an auditor should take if he/she discovers any damaged or obsolete inventory items? How would the auditor determine if the inventory is obsolete? (4 marks)