I have an auditing question that I need help with. Thanks.

Homework Question 3 ( 17 marks) You are the In-charge accountant on the audit of Dezine Inc. (DI). It is March 25th, 2015 and your firm is part way through the December 2014 year-end audit. You are currently assigned to working on various sections within the Accounts Payable and Inventory section of the audit file. Inventory at year-end is $5.2 million. Materiality is set at $225,000. Company Background DI is a small manufacturer of women's jewelry (including bracelets, necklaces, earrings). Most of its products are made of silver, 14 Kt gold, and various semi-precious stones. DI has its financial statements audited due to a $15M loan with RBC Business Financing Group. The terms of the loan requires meeting certain financial covenants - a minimum inventory value of $5M carried at \"lower of cost or market\" and a current ratio of 2:1. DI is also required to submit, within 90 days of its year-end, audited financial statements to RBC. Information on Inventory Cycle The majority of inventory consists of raw materials and finished goods. DI uses a periodic inventory system to track the physical quantity of goods on hand. The count is performed annually on December 31 of each year. Below are some details on the inventory and accounts payable cycle: Raw Materials Inventory DI uses average costing method to price its raw materials (metals, stones, supplies and packaging). The Semi-precious stones and metals are purchased from suppliers in India and Mexico. Goods are shipped FOB Shipping point (Freight on Board - Shipping point means that ownership passed to the purchaser when it leaves the premises in India). Goods take on average 3 weeks to arrive once the supplier has shipped them. The supplier notifies DI that the goods were shipped by emailing them the freight and shipping documents. The party responsible (DI or the Vendor) for insuring the goods during shipment is agreed to before shipment. All purchase orders are sent to the accounting department once issued. Shipping documents and freight/ carrier invoices are emailed directly to the warehouse, after being reviewed (daily) by the purchasing manager and operations manager. All documents and freight/carrier invoices are sent to the accounting department. The accounting department matches the purchases orders and freight documents and then accrues the purchase. Work-in-Process and Finished Goods Inventory DI uses a job order costing system. Costs are applied to the finished goods as they pass through casting, polishing stone setting, and packaging. A manual job ticket is attached to each production batch with quantity of metals, stones, packaging, and number of labour hours (the value is applied at standard labour hour rates). REQUIRED a) Identify and explain four [4] inherent risks that are present in the inventory cycle at DI. Tie each risk to the key assertion(s). Specifically tie your risks to case facts (not the inventory cycle in general) - Use the table the table below for your response. (8 marks): Inherent Risks in the Inventory Cycle Risk & key assertion Explanation (1 mark) (1 mark) Inherent Risks in the Inventory Cycle Risk & Key Assertion Explanation (1 mark) (1 mark) b) Identify and explain three (3) control risk factors (in other words, what can go wrong) that are present in the inventory cycle at DI that could impact existence, cut-off and valuation of inventory at DI. For each control risk, provide an internal control that would prevent that risk from occurring. Use the table below for your response (9 marks): Assertion Existence Cut-off ( Completene ss) Valuation Identify and Explain Control Risk Factor (2 marks) Internal control that would prevent that risk from occurring (1 mark)