QUESTION $4(20$ Marks$)$ Compliance Auditing Damelin$$ Exam Page $5$ of $7$ You are the internal audit manager of Science Co $($Sycamore$),$ and you are currently planning the audit review of the company, Sycamore Science Co $($Sycamore$),$ whose year$-$end was $30$ April $2019.$ Sycamore is a pharmaceutical company, which manufactures and supplies a wide range of medical supplies. The draft financial statements show revenue of R$356$ million and profit before tax of R$59$ million. Sycamore$$s previous finance director left the company in December $2018$ after it was discovered that he had been claiming fraudulent expenses from the company for a significant period of time. A new finance director was appointed in January $2019$ who was previously a financial controller of a bank, and she has expressed surprise that the internal audit team had not uncovered the fraud during last year$$s audit. During the year Sycamore has spent R$18$ million on developing several new products. These projects are at different stages of development and the draft financial statements show the full amount of R$18$ million within intangible assets. In order to fund this development, R$20$ million was borrowed from the bank and is due for repayment over a ten$-$year period. The bank has attached minimum profit targets as part of the loan covenants. The new finance director has informed the audit partner that since the year end there has been an increased number of sales returns and that in the month of May over R$05$ million of goods sold in April were returned. The audit team attended the year$-$end inventory count at Sycamore$$s warehouse. The auditor present raised concerns that during the count there were movements of goods in and out the warehouse and this process did not seem well controlled. During the year, a review of plant and equipment in the factory was undertaken and surplus plant was sold, resulting in a profit on disposal of R$210,000.4\mathrm{.}1$ State internal audit$$s responsibilities in relation to the prevention and detection of fraud and error. $(10)4\mathrm{.}2$ Describe SIX risks that can affect the reputation of Sycamore Science Co$.(10$