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You are the audit manager in charge of the audit of Caro Ltd. The company's year-end is 31 December, and Caro has been a client for six years. The company purchases and resells products for the energy industry including valves, fittings, pumps etc. Clients vary in size from small operators to large companies. No manufacturing takes place in Caro.
Information on the company's financial performance is available as follows:
2017
$'000 $'000
Revenue 50,440 44,825
Cost of sales (40,918) (32,874)
Gross profit 9522 11951
Administration costs (5194) (4,952)
Distribution costs (2,500) (2,500)
Net profit 1828 4499
Non-current assets (at net book value) 4200 4900
Current assets
Inventory 250 1478
Receivables 6500 4552
Cash and bank 550 1790
Total assets 11500 12720
Capital and reserves
Share capital 1000 1000
Accumulated profits 5500 6574
Total shareholders' funds 6500 7574
Non-current liabilities 1500 2258
Current liabilities 3500 2888
11500 12720
Other information
The industry that Caro trades in has seen moderate growth of 6% over the last year.
Non-current assets mainly relate to company premises for storing inventory. Eight delivery vehicles are owned with a net book value of $500,000.
One of the directors purchased a pump during the year.
Inventory is stored in ten different locations across the country, with your firm having offices close to seven of those locations.
A computerised inventory
Required
By reference to the information provided above, prepare the audit strategy for Caro for the year ending 31 December 2017.
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