Part (c) for 4 marks required substantive procedures to obtain evidence in relation to (i) inventory held at third party warehouses and (ii) standard costs used for inventory valuation. This question was answered unsatisfactorily by most candidates, especially (cii).

Many candidates had a reasonable attempt at part (ci) on third party warehouses, suggesting obtaining a confirmation from these warehouses or attending an inventory count.

However part (cii) on standard costs was inadequately attempted. Candidates seemed to see “inventory valuation” in the requirement and so produced generic tests for verifying that inventory should be at the lower of cost and NRV.

This was not what the question required. Candidates did not seem to understand that standard costing was an acceptable option for calculating the cost of inventory and hence they needed to test how close an approximation to actual cost standard cost was.