Tag (SQ): Diamond Industry

You are the audit manager in the firm of Amoah & Partners, an audit firm with ten national offices. One of your clients, Pearl & Stone, purchases diamond jewellery from national manufacturers. The jewellery is then sold from Pearl & Stone’s four shops. This is the only client your firm has in the diamond industry.

You are planning to attend the physical inventory count for Pearl & Stone. Inventory is the largest account on the statement of financial position with each of the four shops holding material amounts. Due to the high value of the inventory, all shops will be visited and test counts performed.

With the permission of the directors of Pearl & Stone, you have employed Crystal Experts, a firm of specialist diamond valuers who will also be in attendance. Crystal Experts will verify that the jewellery is, in fact, made from diamonds and that the jewellery is saleable with respect to current trends in fashion. Crystal Experts will also suggest, on a sample basis, the value of specific items of jewellery. Counting will be carried out by shop staff in teams of two using pre-numbered count sheets.

Required:
(a) List and explain the reason for the audit procedures used in obtaining evidence in relation to the inventory count of inventory held in the shops.

(b) Explain the factors you should consider when using the work of Crystal Experts.

(c) Describe the audit procedures you should perform to ensure that jewellery inventory is valued correctly.