We came accross an instance where we met up with business personnel, who are in metal recycling business. This business collect metal scrap from all other businesses - metal scrap collector collect, segregate and sort the metal scrap into different grade and dislose them to steel mill.
The collector usually has piles of metal scrap in the collection centre. It is almost impossible to weight the piles of metal scrap efficiently.
Based on our research, we understand that there are professional valuers who will measure the weight of the piles of metal scrap scientifically. It is understppd that the professional valuer measure the weight based on the principle of computing a cone- i.e. width x height x density.
We believe that management need to engage professional valuer to estinate the tonnage of the metal scrap. As auditor, we should carry out the work on test of management expert and observe the stock take.