1. Question1 (25 marks) Extracts from the Income Statement Draft 2016 (P000) Actual 2015 (P000) Revenue 25 417 23 867 Cost of sales (21 895) (20 924) Gross profit 3 522 2 943 Administrative expenses (2 205) (2 011) Loss on sale of vehicles and trailers (232) (0) 1 085 932 Profit from operations (345) (302) 740 630 Extracts from Statement of Financial Position Draft 2016 (P000) Actual 2015 (P000) Non-current assets Property, plant and equipment 7 987 6 528 Current assets Trade receivables 3 156 2 681 Non-current liabilities Loan 3 000 2 500 Current liabilities Trade payables 1 553 1 922 Overdraft 499 454 Loan 500 250 REQUIRED:

a. Explain the term analytical procedures and the reasons why they are carried out at the planning stage. (7 marks)

b. Identify and explain the risks of material misstatement to assist with the planning of the engagement. (14 marks)

c. Ordway Co is a long-standing audit client of your firm and is a listed company. Bobby Wellington has acted as audit engagement partner for seven years and understands that a new audit partner needs to be appointed to take his place. Explain the ethical threats raised by the long association of senior audit personnel with an audit client and the relevant safeguards to be applied. (4 marks)