QUESTION # 1 (10 MARKS) You are approached by a close friend who is the CFO at a local private company, Piano (Private) Limited, to perform their audit. You are one of the partners in your audit firm and ask your manager to highlight any points he feels are pertinent in its risk evaluation. He shares the observations below. The Manager informally contacts the prior auditors who point out that the client was very uncooperative and often withheld information till the last moment. They refused to answer emails and phone calls and when this was brought up in the audit committee they behaved very rudely The internal audit head reports to the CFO and all his reports are pre-approved by him before going to the audit committee. The CFO explains that the company is small and cannot afford many highly qualified individuals and as he is senior to internal audit head, he is reviewing the files. A new management bonus has been started this year that rewards all senior management on the basis of financial results. The Company has implemented new accounting software during the year. The Company had taken a significant amount of loan for an expansion of the plant but with the Covid-19 situation sales have drastically dropped. The CFO has stated that depending on the situation, they might need to take further loans to pay off previous ones but once the situation improves they should be okay. The manager makes a brief comment about you being friends with the CFO but doesn't document it. Comment on what risks arise due to these observations and whether they have any impact on your acceptance or rejection of the client