All 4 You Ltd owns a chain of retail outlets that sell newspapers, books and magazines, snacks and drinks, cigarettes and fancy goods for the tourist trade. There are 85 retail outlets spread throughout Australia.

All 4 You has approximately 100 stock lines ranging in price from less than a dollar to some products designed for the tourist trade, which sell for several hundred dollars. A large amount of stock is retained in three warehouses which are used as distribution centres for the retail outlets.

This allows central purchasing processes, reducing purchase costs and managing delivery schedul[1]ing to reduce transport costs.

A full stocktake for all warehouses and retail outlets is to be carried out at the year end. The company maintains a stock system that can produce various reports, including:

1. A complete stock listing for each location, showing: stock code, quantity held, cost per unit and total cost for the stock line.

2. An ageing report of all stock lines, showing: stock code, quantity held, month-by-month quan[1]tities sold and purchased over last three months.

For the purposes of the stocktake, an additional report is produced which, for each location, lists the stock code and description for each item held at the location. Quantities are omitted and should be counted by the stock count team.

Required

You are the auditor, planning your audit approach to test the accuracy of the stocktake. How would each of the following affect the sample you would select for testing?

(a) One Melbourne outlet has a higher value of stock held compared with other outlets.

(b) In the central Perth outlet, there has been a significant number of stock thefts over the past

few months.

(c) No tests of controls were performed in relation to inventories.

(d) The Western Sydney branch historically has shown only insignificant differences between stock counted and the amounts recorded on the stock system.

(e) The staff carrying out the check on the stocktake at the Brisbane warehouse are new to the

job.

(f) Of the total of six staff in the South Adelaide outlet, three, including the manager, have been

appointed in the last two months.

(g) The Launceston branch has shown an increase in sales margin in recent months that is signif[1]icantly higher than any other branch.

Answer rating: 100% (QA)

a If one Melbourne outlet has a higher value of stock held compared with other outlets it would be prudent to select a larger sample size from that outlet to ensure that the stocktake is accurate This ... View the full answer