Problem - "The following review points were raised by the audit manager regarding the audit of inventory and work in progress of MFD Cameras Limited for the year ended 31 March 2006.
a. The company uses a standard cost system to value inventory. No audit work had been carried out on standard costs at the final audit, although the standard cost system had been extensively tested at the interim audit in October 2005. The last update of the standard costs was made by management accountant in November 2005. A favourable material price variance has been credited to the Income Statement this year as a gain.
b. No audit work had been performed on the net realizable value of inventory items.
c. No analytical procedures had been performed to check on the accuracy of inventory value.
d. No audit work had been performed to ascertain the existence of consignment stock with third parties.
REQUIRED: Describe the audit procedures which would be carried out by the audit staff to satisfy the audit manager's review points and to ensure that inventory and work in progress are fairly stated in the financial statements.
Helpful textbooks: Auditing and Assurance Services, Messier at al. International edition --- chapter 13. No word limit, quality is better than quantity.