QUESTION 1 You are the audit manager assigned to the audit of a new client, Deltex Ltd, for the year ended 31 March 2019. Deltex Ltd manufactures pharmaceutical products, contact lenses and lens care products as well as surgical equipment and devices. Audit fieldwork for the year ended 31 March 2019 has largely been completed. In advance of audit partner review. later this week and mindful that planning materiality had been set at 200,000, you are reviewing the following documented matters: 1. Holdings of lenses valued at 500,000 are included in inventories at 31 March 2019. A chance remark overheard at lunch one day by one of the audit engagement team members highlighted that demand for this product has dropped significantly due to the introduction of a rival competitor offering. Discussions with Deltex Ltd management suggest that this product inventory will be sold to a company in South America for a total of 100,000. To facilitate this sale, transportation costs of 30,000 will need to be paid by Deltex Ltd. The directors have not made any adjustments in respect of this in the 2019 draft financial statements as they understand that it will impact the subsequent year's figures and will report the sale in the 2020 financial statements accordingly. 2. No audit work has been completed on the wages and salaries figures as the payroll function is outsourced to Payslips Ltd. ian when operating equipment