The following financial information was extracted from MCLs current draft financial statements and those of the previous year:

2017 ($M)	2016 ($M)	2015 ($M)
Revenue	220	260	240
Total assets	260	280	250
Net Profit before tax	19	(3)	17

The car parts and accessories industry has been very competitive and consumer demand appears to be slowing in anticipation of change with electric and driverless cars coming into the market. The company has recently restructured its operations to outsource its New Zealand manufacturing to a new factory in China from May 2017.

Required:

a) Select an appropriate benchmark for determining the preliminary figure for materiality for MCL and briefly explain your selection. (7 marks)

b) Identify three risk factors and briefly explain why they will affect audit planning. Include in your explanation how such risks affect preliminary overall materiality. (7 marks