You are a staff assistant working for a public accounting firm and have been assigned to audit inventory for a client, Joy Jewellers JJ The fiscal year end of the company is December JJ has eight stores in the Ontario. The company deals in precious and semiprecious stones and high quality costume jewellery. Diamond engagement rings make up over of sales and and carat gold chains make up another

The president, Joy Jeweller, is an accredited geologist. Mrs Jeweller attends auctions in New York and London several times a year. The rough cut gems are ground and polished in JJs lab in the flagship store and distributed among the eight stores. Mrs Jeweller needs to anticipate well in advance what she believes the latest trends in costume jewellery will be Mrs Jewellers track record is excellent but occasionally she misses the mark and has to sell some of the jewellery at a substantial discount. The company plans to do its inventory count on December

During peak demand periods, for example just before Christmas and Valentines Day, Mrs Jeweller acquires on consignment jewellery from another manufacturer.

Perpetual inventory records are kept in each store, which should balance to a control account kept in the main branch. Documentation for all purchases is kept in the main branch. Markups average on cost

All inventories are insured with a coinsurance clause, and employees are bonded. All employees receive a bonus based on sales for the last weeks in December. The bonus is based on the numbers of years working at JJ as well as a percentage of sales.

It is now December and you are preparing for the physical inventory count on December

Required

Explain briefly four specific risk factors related to the counting and valuation of JJs inventory at December For each risk identify the management assertion and one audit procedure to address the assertion.

Answer rating: 100% (QA)

Risk factors related to the counting and valuation of Joy Jewellers inventory at December 31 2024 1 ... View the full answer