Identify the two key assertions at inherent risk

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Question - You are currently part of the audit team that is conducting the audit of Big Trucks Ltd (Big Trucks) for the year ended 30 June 2020. Big Trucks is an importer of large pickup trucks such as Ford's F250 and Dodge's Ram 2500. Big Trucks converts these vehicles to comply with Australian road rules and standards. Your audit manager has asked you to oversee the audit of Big Trucks' inventory account balance, which is highly material. Big Trucks maintains details of stock quantities on its computer system. These stock quantities are updated from goods received notes and sales invoices. Due to the nature of its end-product, Big Trucks holds a large number of highly specialised component parts, for which there is no secondary market. Big Trucks conducts a 'wall-to-wall' count of inventory, whereby all operations cease and they count all inventory in a single stocktake. This stocktake takes several days to completeand is conducted over the last week of the financial year.

Required -

a) Identify the two key assertions at inherent risk of misstatement for Big Trucks' inventory and explain the reasons why.

b) Outline an audit program of substantive testing to be conducted on the inventory account of Big Trucks. Provide a brief reason for each audit procedure chosen. Group the selected procedures under the following categories:

i. Initial Procedures.

ii. Analytical Procedures.

iii. Tests of Details of Transactions.

iv. Tests of Details of Balances.

v. Presentation and Disclosure.

Reference no: EM132702473

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