Question 2 (31 marks) (a) Describe the quality requirements of audit evidence. (4 marks) (b) Define the following assertions for inventory: (6 marks) (i) Existence (ii) Completeness (iii) Valuation and Allocation (c) (i) The inventory costing $150,000 being ordered by customers before the year end was excluded from the ending inventory balance as they are set aside for delivery after year end. The ending balance of inventory as on the statement of financial position was $600,000. (i) Inventory list shows 40 boxes of rice but only 38 boxes were found in the warehouse. (iii) The inventory has a cost of $600,000 and realizable value of $540,000 as the items are outdated. The ending balance of inventory as on the statement of financial position was $600,000. For each misstatement above, explain which of the above assertions is violated. (Each assertion can only be used once.) Also, give the relevant audit objective the auditor should focus on when detecting the misstatement if the assertion is "Valuation and Allocation". (7 marks) Suggest the correct amount of inventory as on the statement of financial position in (i) and (iii) respectively. (2 marks) (d) Suggest a possible kind of evidence the auditor may use to detect each of the misstatements in (c) (1) - (iii). (Different evidence should be suggested for each misstatement.) Describe how that evidence can help the auditor detect the misstatement. (9 marks) (e) Which misstatement in () is more difficult to detect? Explain