Identify and explain the inherent audit risks in the external audit for follwing financial statements.

During the last year, James employed his best friend from school days, Betsy Mi, as his company accountant. Betsy is very rich and does accounting as a hobby to keep herself busy. She has tried to pass her professional accounting exams, but has not been successful. Nevertheless, she feels she knows enough to do a good job of the accounts and financial statement preparation for James.