Question 2 (35 marks) Mary is an audit manager of Jelly & Co and are in the process of reviewing the computer inventory system documentation for your audit client, APPLO Co (APPLO) which manufactures computer equipment. The companys factory and warehouse are based on one large site, and their year-end is 30 December 2019. In preparation you have been reviewing the inventory count instructions for completed computer equipment provided by APPLO. The count will be undertaken by 15 teams of five counters from the warehouse department with APPLOs financial administrator providing overall supervision. Each team of five is allocated a number of boxes within the warehouse to count and they are provided with sequentially numbered inventory sheets which contain product codes and quantities extracted from the inventory records. The counters move through each allocated boxes counting the computer equipments and confirming that it agrees with the inventory sheets. Where a discrepancy is found, they note this on the sheet. The warehouse is large and approximately 10% of the space have been rented out to third parties with similar operations; these are scattered throughout the warehouse. For completeness, the counters have been asked to count the inventory for all boxes noting the third party inventories on separate blank inventory sheets, and the finance department will make any necessary adjustments Some of APPLOs completed computer equipments are high in value and are stored in a locked area of the warehouse and all the counting teams will be given the code to access this area. There will be no despatches of computer equipment during the count and it is not anticipated that there will be any deliveries from suppliers. Each area is counted once by the allocated team; the sheets are completed in ink, signed by the team and returned after each bay is counted. As no two teams are allocated the same boxes, there will be no need to flag that an area has been counted. On completion of the count, the financial controller will confirm with each team that they have returned their inventory sheets. APPLOs finance director has asked your firm to undertake a non-audit assurance engagement later in the year. The audit consultant have not been involved in such an assignment before and has asked you to explain what an assurance engagement involves.

Required: 2.1 Explain the five elements of an assurance engagement. (15 marks) 2.2 Briefly explain each of the below engagements/terms. (15 marks) 2.3 Describe the level of assurance provided by external audits and review engagements. (5 marks)