You have been assigned to the audit of inventory for Perak Grocer Sdn Bhd, a grocery wholesaler that sells to independent grocery stores. Inventory is by far the largest item on their balance sheet. Perak Grocer operates in all the states in peninsula Malaysia with a central distribution centre in Ipoh and a regional distribution center in each of the eleven states in which it operates. Management has implemented a sophisticated perpetual inventory system to assist in managing quantity levels in its central as well as all the regional distribution centers. All accounting is centralized at Ipoh, including purchasing which originates from the Ipoh center using online inventory information for all centers. All inventory deliveries are made to the Ipoh center where it is then sent to the regional centers. Product and quantity information for sales are prepared online by each distribution center for updating the perpetual records, with a hardcopy sent to Ipoh. Each center undertakes a quarterly physical inventory for comparison and adjustment of the perpetual records. The count results are sent to Ipoh where all adjustments are made. Regional centers' access to the perpetual records are limited to online sales transactions entry. Internal auditors test the perpetual records continuously, sample physical inventory counts and test inventory adjustments. Their tests and results are filed in Ipoh. Required:

(a) Critically identify the internal controls over inventory that are present and describe the audit tests that you would use to evaluate their effectiveness (14 marks)

(b) Critically discuss how the results of the above audit tests would impact your physical observation test of inventory of the company (4 marks)

(c) Describe the auditing procedures that can be used to determine whether slow moving or obsolete stocks have been included in the inventory of the company (7 marks)