ABC company manufactures and sells a variety of furniture. You are leading the internal audit department and you are about to commence the audit on the inventory. The financial statements show profit before tax of $21 million and total assets of $97 million. ABC company launched a new brand of office furniture called XYZ furniture in December 2020 but sales has been lower than expected and the directors are considering a discounted sales price. ABC company's products are valued using a standard costing method and the standard cost comprises raw material, labor cost and production overheads. As at 31st of March 2021, XYZ furniture products with standard cost of $ 5.6 million were included as finished goods in inventory. The year end is 30th of June 2021. Calculate the materiality of the matter and describe the procedures the auditor should perform to obtain sufficient and appropriate audit evidence in relation to the inventory of ABC company.

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Answer Lets frst understand the concept of materiality As materiality is a relative concept its usua... View the full answer