Subsequent evidence

The following scenario relates to questions 196 – 200
It is 1 July 20X5. You are an audit manager in Shifu & Co responsible for the audit of Panda Co for
the year ended 31 March 20X5. The draft financial statements show revenue of $55 million and
profit before taxation of $5.6 million. Panda Co manufactures chemicals and has a factory and four
offsite storage locations for finished goods. The final audit is almost complete and the financial
statements and auditor’s report are due to be signed next week.
The following two events have occurred subsequent to the year end. No amendments or disclosures
have been made in the financial statements in respect of the two events.
Event 1 – Defective chemicals
Chemicals are manufactured up to one month before despatch to enable Panda Co to undertake
extensive quality control checks prior to despatch. Testing on 3 April 20X5 found that a batch of
chemicals produced in March 20X5 was defective. The cost of this batch was $850,000. In its current
condition it can be sold at a scrap value of $100,000 with selling costs of $1,000. The costs of
correcting the defect are too significant for Panda Co’s management to consider this an alternative
option.
Event 2 – Explosion
An explosion occurred at the smallest of the four offsite storage locations on 20 April 20X5. This
resulted in some damage to inventory and property, plant and equipment. Panda Co’s management
have investigated the cause of the explosion and believe that they are unlikely to be able to claim
on their insurance. Management of Panda Co has estimated that the value of damaged inventory
and property, plant and equipment was $900,000 and it now has no scrap value.

Which THREE of the following procedures should now be performed by the auditor of
Panda Co?
1)Obtain written representation from management confirming all subsequent events
have been communicated to the auditor
2) Inspect purchase invoices to confirm the cost of the defective inventory
3)Review the most recent quality control reports in to identify other instances of
defective inventory included within inventory at 31 March 20X5
4) Obtain a schedule of assets damaged in the explosion to determine the amount of loss
incurred
5) Review correspondence with the insurance company regarding the likelihood of a
successful claim

I had doubt in the scenario why the option 2 and option 3 is not the correct procedure here. I had looked the kaplan kit answer but I didn’t get their explanation
Yes, does the auditor must obtain the written representation in relation to the subsequent events??
whatever the condition will be ??