The following scenarios describe situations which have arisen in two audit clients of your firm: Myer Ltd There was a major water leak at the company's largest factory during the winter close down that resulted in the client being unable to conduct a year end stock count. They have used the prior year's inventory figure of 180,000 in the year end accounts to estimate the balance. The profit before tax of Myer Ltd for the year ended 30th September 2020 was 400,000. Pedro Ltd Pedro Ltd was informed that a major customer, Ash Pharmacies, who made up approximately 30% of total revenue, had gone into administration since the year end. The directors believe Pedro will be able to continue trade and have provided a draft cash flow forecast that shows the company making only a small loss over the next 12 months. For the year ended 30th September 2020 the company showed revenues of 1,600,000 and a profit before tax of 140,000. Required: a) Describe the concept of materiality in the context of an audit and why it can be a difficult area for the auditor. (8 marks) b) For each of the two scenarios above discuss the implications for the audit report. (12 marks) c) Explain the extent to which management representations would provide sufficient audit evidence to the auditor in the above scenarios. (5 marks)