SITTING PRETTY

Sitting Pretty Co is a small, family$-$run company that makes plastic chairs in a varicty of shapes and colours for children and 'fun at hearf adults. It buys in sheets of plastic which can be cut and bent into the correct shape and aplastic leg that is custom made by another company to Sitting Pretty's requirements. All off$-$cut plastic is sent back to the supplier who melts it down and re$-$uses it$,$ for which Sitting Pretty receive a $10\%$ discount off their purchase price.

For the inventory count, the factory manager ensures that no work$-$in$-$propress is outstanding and closes down production for the day. The factory workers come in early on the day of the inventory count to count the inventory, and they are entitled to go home as soon as inventory is counted. Good contrds have always been maintained over the inventory count in previous years. There are no perpetual inventory records. Raw materials are all kept in the stores and are only taken out when they are required for production. F mished goods are kept in the end of the factory, near the delivery exit.

You are the audit assistant assigned to attend the inventory count. You have just rung the factory mamager and he has mentioned that on the day of the inventory count a large consipnment of plastic is going to be delivered. It is the only day that his supplier can make the delivery, and he needs the material to continue with production on the day after the count.

The audit engagement partner has told you that he is aware that Sitting Pretty changed the specification of their customized leg recently, after a series of complaints over the stability

of their chairs. Last year's inventory was valued at Rs$.200,000$ in the balance sheet, of which Rs$,30,000$ related to raw material inventory.

Fimished goods are all carried at the same valuation as each other as there is xeiv little difference between the inventory ranges. Planning materiality for this year has been set at Rs$.5,000$ on the grounds, at this stage, that the figures are expected to be similar to last year.

Required

$($a$)$ Explain the importance of the inventory count in this situation.

$($b$)$ Prepare notes for your audit supervisor detailing the procedures you propose to undertake in relation to your inventory count antendance.

$($c$)$ Outine the procedures, which should be taken in relation to cut$-$off at the final

audit

$($d$)$ List the audit procedures you would carry out on the valuation of inventory at the final audit