QUESTION 11

Your firm is the auditor of APACK Potteries, which is a wholesaler of pottery products (eg cups, saucers, plates, mugs etc), and you are carrying out the audit for the year ended 30 April. You have been asked by the senior in charge of the audit to carry out checks on cut-off and to identify stock which may be worth less than cost and to check that it has been valued correctly. The company has a computerised inventory control system which records receiptsand dispatches of stock, current stock quantities and the age of the stock. You attend a count of all the stock at the year end.

You are required:

(a)To explain FIVE procedures you would perform to confirm that inventory, sales and purchases cut-off is accurate.

(b)Define in detail the basis for valuing inventory in accordance with International Financial Reporting Standards.

(c) (i) State the types of stock which may be worth less than cost;

(ii) Describe FIVE investigations you will carry out to identify this stock;

(iii) Describe the audit work (any FIVE of them) you will carry out to determine the net realisable value of the stock you have found from your investigations in part (c) (ii) above.