Question 2 (20 Marks] Part A [10 Marks] Gifts Ltd (Gifts) operates 30 specialty gift stores. The company's yearend is 30 June 20x5. The audit manager and partner recently attended a planning meeting with the finance director and have provided you with the planning notes below. You are the audit senior, and this is your first year on this audit. The audit manager has asked you to undertake some research to gain an understanding of Gifts, so that you are able to assist in the planning process. He has then asked that you identify relevant audit risks from the notes below and also consider how the team should respond to these risks. 0 Gifts spent $2.1 million in refurbishing all of its stores and extending their central warehouse. In order to finance this refurbishment, Gifts borrowed $2 million from the bank. This is due to be repaid over five years. A charge over the company's assets had been provided as security. 0 The company will be performing a yearend inventory count at the central warehouse, as well as at all 30 stores, on 30 June 20x5. Inventory is valued at selling price less an average profit margin, as the finance director believes that this is a close approximation of cost. 0 Prior to the 20x5 financial year, each store maintained its own financial records and submitted returns monthly to head office. During the 20x5 financial year all accounting records were centralised within head office. Therefore, at the beginning of the 20x5 financial year, each store's opening balances were transferred into head office's accounting records. The increased workload at head office has led to some changes in the finance department and in May 20KB the financial controller left. Her replacement will start in late June 20x5. Required Using the background information provided above, identify five (5] audit risks and explain the auditor's response to each risk in planning the audit of Gifts. 10 marks