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Explain two key risks of material misstatement in inventory

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Question - Jojo Ltd manufactures cakes for sale in supermarkets around Australia. Despite the excellent quality of raw food materials available in Australia, Jojo imports many products from China and South America. In the past, there have been some issues around the quality of the raw materials received. All deliveries are invoiced and paid in US dollars. Jojo uses hedge instruments to reduce the risk of large foreign currency losses. The raw materials are shipped to Australia and under the contracts, Jojo has signed they take ownership on the day the ships leave the overseas port. On average the shipmentstake 18 days to arrive in the warehouse of Jojo from the day of shipment. The audit partner has identified that inventory is at risk of material misstatement. Based on the facts above, explain two key risks of material misstatement in inventory.

Reference no: EM132811649

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