QUESTION $1$

You are the auditor in charge of the audit of Spare Parts Ltd$,$ a wholesaler in motor spare parts.

The company operates its business from one large store in Reitfontein.

The company's inventory consists of a variety of spare parts, ranging from nuts and bolts to motor

vehicle engines. All inventory is the property of the entity and is purchased from its holding

company $($Producers Limited$)$ which acts as manufacturer. The inventory records are fully

computerized and a perpetual inventory system is in use. The company has no internal audit

function, although management does from time to time perform certain tests on the inventory.

During the planning meeting for the forthcoming audit, the manager informs you that the annual

inventory count will take place on $31$ July $2022.$ The company's year$-$end is $30$ September $2022.$

The company's policy is to order inventory in such a manner that there is no inventory$-$in$-$transit

during inventory counts, or at year$-$end.

YOU ARE REQUIRED TO:

$($a$)$ Discuss fully the direction in which you will audit inventory of Spare Parts Limited.$(2)$

$($b$)$ Describe the audit procedures you would perform in order to obtain sufficient and

appropriate audit evidence on the inventory account that will be reflected in the

statement of the financial position