You are the manager in charge of the annual audit of the financial statements of ABC Limited , a manufacturer of electronic home appliances , for the year ending 31 December 2020. You have just received a copy of ABC Limit ed 's stocktake instructions. You are in general satisfied with ABC Limited 's stocktake instructions except for the following inven tory movement s on 31 December 2020

Other than the immaterial amount of raw materials, work in progress and finished goods in the manufacturing plant, all inventory is stored in ABC Limited 's own warehouse, next to the manufacturing plant.

The manufacturing plant will operate on 31 December 2020. On 30 December 2020 , the

warehouse will deliver to the plant the estimated quantit ies of raw materials required for the production on 31 December 2020. There will not be any inventory in or out of the manufacturing plant on 31 December 2020 until the completion of the stocktake.

Raw materials will continue to be received and finished goods will continue to be shipped

during the invent ory count on 31 December 2020. The receiving bay and the shipping bay are located in the covered front yard of the warehouse.

Same as last year, ABC Limited will use count sheets to record the counting res ults during the stocktake and you have plan ned to attend the stocktake of ABC Limited on 31 December 2020.

Required:

(a) Without referring to the information above, list and briefly explain six key factors

that commonly contribute to the risk of misstatement in the assertions for inventories.

(b) Explain why you should read and understand the ABC Limited 's stocktake

instructions before attending ABC Limited's year end stock take.

(c) What procedures will you suggest ABC Limited to establish to make sure that all

inventory is counted and that nothing is counted twice given that there is inventory

movement during the count.

(d) Identify four different assertions related to the year end inventory that you would

verify while attending ABC Limited's stocktake. Describe an audit procedure for

verifying each of the assertio ns identified that you will perform when attending ABC

Limited's stocktake.