Rocks Ltd. quarries limestone, crushes it to standard commercial size, stockpiles it, and eventually ships it to customers by rail. Production is measured by the number of quarry truckloads fed to the stone crushing equipment, and each truck is considered to carry 20 tons. The railroad weighs every carload, and most of the customers weigh the stone again when delivered by the railroad.

Every month-end the inventory is determined by the company engineer, who takes into consideration the geometric shapes and dimensions of the stockpiles. A predetermined compaction factor is applied to the volume in the stockpiles to convert it to weight of stone. Rocks Ltd.'s records for the last 4 months of the year show the following information in tons of limestone:

A. Carl, the company's auditor, is asked to determine the causes for the year- end inventory shortage. What audit procedures should Carl's investigation follow, and what areas would Carl explore to account for the differences?

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Per production records Physical Opening Closing inventory Production Shipments inventory closing inventory September 4,520 780 (760) 4,540 4,560 October 4,540 800 (750) 4,590 4,450 November 4,590 740 (760) 4,570 4,160 December 4,570 620 (790) 4,400 3,840