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 on December $31,2024.$

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.