SECTION B

3. For Eyes Opticians Ltd (For Eyes) is a chain of opticians operating in the east of England. It has an inventory of glasses, contacts lenses and accessories in its six retail and eye-test premises. The inventory is valued at approximately £240,000.

Revenue for the year is approximately £6.3 million. For Eyes maintains a perpetual inventory system. You are planning the year-end inventory count visits.

Required

a) Explain why it is important that the auditor attends inventory counts and whether it will be necessary for the auditor to attend all six of the year-end inventory counts.

b) Explain what work you will need to carry out to ensure that audit coverage at each count is appropriate and what you will be looking for when you review the client’s count instructions.