Quality Products Limited is engaged in manufacturing of bicycles. As part of manufacturing activities, it sends raw material to some business…

In accordance with requirements of SA 501, "Audit Evidence- Specific Considerations for Selected Items”, when inventory under the custody and control of a third party is material to the financial statements, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of that inventory by performing one or both of the following: Request confirmation from the third party as to the quantities and condition of inventory held on behalf of the entity.Perform inspection or other audit procedures appropriate in the circumstances. Other audit procedure may include – Inspecting documentation regarding inventory held by third parties.Requesting confirmation from other parties when inventory has been pledged as collateral.Attending, or arranging for another auditor to attend, the third party's physical counting of inventory, if practicable.Obtaining another auditor's report, or a service auditor's report, on the adequacy of the third party's internal control for ensuring that inventory is properly counted and adequately safeguarded.