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 31. JJ has eight stores in the Ontario. The company deals in precious and semi-precious stones and high quality costume jewellery. Diamond engagement rings make up over 50% of sales and 10, 14, and 18 carat gold chains make up another 20%.

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 JJ's 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. Jeweller's 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 31, 2024.

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. Mark-ups average 150% on cost.

All inventories are insured with a 50% co-insurance clause, and employees are bonded.All employees receive a bonus based on sales for the last 2 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 10, 2024 and you are preparing for the physical inventory count onDecember 31, 2024.

Required

Explain briefly four specific risk factors related to the counting and valuation of JJ's inventory at December 31, 2024. For each risk identify the management assertion and one audit procedure to address the assertion.

Arrange your answer using the table on the following page.

Explanation of Risk (1 mark)	Audit procedure to address management assertion ( 1 mark) and note the assertion (1/2 mark)