You are the audit supervisor of Cook & Cook and you are preparing for the final audit of Diamond Ltd (Diamond), a trading company, for the year ended 31 December 2021. Diamonds profit before tax per the draft financial statements for the year ended 31 December 2021 was 50 million and total assets as at that date totalled 800 million. Diamond sells specialised medical equipment such as CT scans, monitors, ventilators and infusion pumps to hospitals, in both the public and private sectors, across the United Kingdom. Diamonds head office and warehouse are based in Leeds and all supplies to customers are made from this location. The following matters came up in discussions between your audit team and Diamonds finance director in the course of conducting the audit fieldwork:

Inventories

The total value of inventory at the year-end was 2.2 million. Diamond uses a continuous or perpetual inventory counting method and the computerised system tracks sales and keeps a running tally of quantities on hand. Any inventory write-offs during the year in relation to inventory loss or other inventory adjustments are authorised by the finance director. The finance director has assured the audit team that the inventory counting system in use is very accurate. Included in the year-end inventory, is a batch of faulty ventilators with a cost of 500,000. A fault has been detected with the calibration of these units and Diamond will bear all the cost of fixing the fault before they can be sold.

Describe IVE substantive audit procedures you will perform in relation to the inventories balance.