QUESTION 4 Inventory is often the largest account on the statement of financial position. Due to this factor, the audit of inventory especially tests of the year-end inventory balance is often the most complex and time-consuming part of the audit. As such, finding misstatements in inventory accounts can be challenging. The following misstatements are included in the inventory and related records of Zest Berhad: (i) An inventory item was priced at RM12 each instead of at the correct cost of RM12 per dozen. (ii) In taking the physical inventory, the last shipments for the day were excluded from inventory and were not included as a sale until the subsequent year. (iii) The clerk in charge of the perpetual inventory master file altered the quantity on an inventory tag to cover up the shortage of inventory caused by its theft during the year. (iv) After the auditor left the premises, several inventory tags were lost and were not included in the final inventory summary. (v) When raw material acquisitions were recorded, the improper unit price was included in the perpetual inventory master file. Therefore, the inventory valuation was misstated because the physical inventory was priced by referring to the perpetual records. (vi) During the physical count, several obsolete inventory items were included. Required: (a) For each misstatement, describe an internal control that should have prevented it from occurring. (13 marks) (b) For each misstatement, describe a substantive audit procedure that can be used to uncover it. (12 marks) (Total: 25 marks)