QUESTION $4(5$marks, $7\mathrm{.}5$ minutes$)$

In planning an Audit, the use of the analytical procedures may be used to assist in identifying

and assessing the risk of material misstatement. The following information pertains to Dough

Ball $($Pty$)$Ltd one of your Audit clients:

$1.$ Dough Ball $($Pty$)$ Ltd bakes bread products which supplies to numerous

supermarkets, petrol station shops, etc., throughout Gauteng.

$2.$ The company operates from one central bakery and uses a fleet of vans to deliver to

its customers.

$3.$ Minimal inventory is held at any time.

$4.$ The company employs a small number of administration staff and a reasonably large

labour force. Temporary staff are employed around public holiday periods when

bakery product sales increase.

$5.$ The accounts department maintain detailed production and delivery records.

Reasonably detailed monthly accounts are prepared.

$6.$ There is a detailed annual budget which is broken down into months.

All the above documentation for the current and prior year is available to your firm as well as

the draft financial statements for the financial year$-$end $31$ October $2021.$

YOU ARE REQUIRED TO:

a$)$ Justify the performance of analytical procedures as a risk assessment procedure.