(9 marks) It is October 4, 2021. You are the senior accountant in charge of the audit of Bullseye Ventures Ltd. ("Bullseye"), a company that manufactures and sells a very high-end line of throwing darts (called "The Bull"). The darts are sold in a small, compact carrying case to make them easier to transport for travel to various pubs and dart events. Due to the complexity of inventory, you are responsible for planning the audit of inventory. Bullseye uses a perpetual inventory system. The dart grips include triptwentium, an extremely rare substance that helps balance them during flight. The substance is purchased from Germany and must be smelted into the other metal for the dart grip within 4 weeks of arrival, or it loses its key chemical properties and must be disposed of. The other raw materials used in the darts (plastic, steel, and gold) have indefinite shelf lives. To stay current with the needs of darts enthusiasts in the marketplace, Bullseye releases a new product line of "The Bull" every year. When the new release occurs, Bullseye marks down the selling price of each previous year's version by 50%. All inventory is held at Bullseye's manufacturing facility in Okotoks, AB. The raw materials and finished goods are kept in separate areas of the facility, with requisitions used to transfer raw materials to the manufacturing area. This is typically done at the start of each day based on the production schedule. About 10% of the time, a dart will have a defect in one of the parts. The finished goods area of the facility is left unlocked so the shipping team can ensure quick shipments if an order is being filled after manufacturing hours are over. Inventory quantities are counted each year-end date. As the end of the year corresponds with most staff members' holiday plans, there is usually just one employee that counts the inventory and updates the inventory accounting records before heading home on December 31st. This year, in order to head out early for some new year's eve plans, the staff member plans to get the counting done on December 30th. Following is Bullseye's inventory listing at the time of audit planning: Sept 30, 2021 Dec 31, 2020 Item Total $ cost Total cost Raw materials $ 59,525 $ 47,800 Finished goods $ 279,000 $ 227,250 Total inventory $ 338,525 $ 275,050 REQUIRED Identify three potential risks of material misstatement in inventory present in this client and briefly explain why it is a risk using case facts. Then, for each risk identify a specific audit procedure that would address the risk. Note that procedures may or may not be related to the physical count. (9 marks)
