DC 8-6 Comprehensive Audit Planning Case. LO1, LO2, LO4 You have been assigned to the audit of the financial statements of Equality Coffee Roasters Limited (ECR) for its year ending December 31, 20X2. The company started five years ago and is in the business of obtaining coffee beans from around the world under a fair trade policy, roasting the beans locally, and selling them to coffee shops in Ontario. Most of their sales are in the urban centres of the province. ECR's business involves obtaining raw coffee beans from coffee-producing countries around the world. ECR's business model is to only purchase coffee from certified fair trading plantations where the agricultural workers receive a fair wage and share of profits. Investors in ECR's shares are primarily ethical investors and mutual funds that concentrate on investing in companies that have high corporate social responsibility ratings. In the preliminary audit planning done to date, your audit manager has determined that inventory is the account with the highest risk of material misstatement. Last year, the audit team uncovered an error in the ending inventory balance in the amount of a $65,000 overstatement. You have been assigned to continue the ECR audit planning work by finalizing and documenting various risk assessment and planning decisions so the audit team can move on to developing the detailed audit plans. It is now January 20X3, and you are at the ECR offices to begin your audit work. In discussion with the company's management, you have learned that ECR currently has about 10% of the coffee bean market in Ontario. Its coffee is considered to be a premium product because of its ethical sources but also because it purchases only the highest quality of Arabica beans and uses a special just-in-time roasting and delivery business process that puts the very best quality product into the stores at the peak of its flavour. About 75% of its sales are to independent neighbourhood coffee shops in urban areas. ECR also sells to one major coffee shop chain and supplies an up-market grocery store chain. Fair trade coffees can sell for 20-25% more than coffee from other sources and have enjoyed increasing popularity over the past few years. Exhibit DC 8-6 shows the December 31, 20X2, adjusted trial balance listing that you have obtained from ECR management. Page 331 EXHIBIT DC 8-6 Equality Coffee Roasters Limited Trial Balance as of December 31, 20X2 Cash DEBITS CREDITS 248,726