this question is based on auditing

Question 2 (9 marks) Fab & Fit Ltd (FAF) refinanced its existing loans with National Bank and also obtained additional borrowings from them during the year. National Bank has included covenants in the new loan agreements stipulating that FAF must make a profit before tax in every financial year and that it must maintain a net current asset position (i.e. current assets exceed current liabilities at all times). You have been provided with an extract of FAFs financial report for the year ended 30 June 2020, which shows that FAF made a profit before tax $110,000 and had a net current asset position of $40,000. Extract from the Statement of Financial Position 30 June 2020 $000 30 June 2019 $000 Cash and cash equivalents 200 206 Trade and other receivables 1414 1234 Inventories 684 688 Total current assets 2298 2128 Trade and other payables (604 560 Deferred revenue (420 602 Loans and borrowings (1202 812 Employee benefits (32) (28 Total current liabilities (2258) (2002) Net current assets 40 126 Extract from the Statement of Financial Performance 30 June 2020 $000 30 June 2019 $000 Revenue 4286 4275 Required: From the above information provided in relation to FAF: 1. Identify TWO key accounts that are at risk of misstatement due to fraud. 2. For each account identified in (1) above: (a) Provide a brief explanation as to why the account is at risk: (b) List the key assertion where audit efforts should be concentrated; and (c) Describe substantive tests of detail you would perform to gather sufficient appropriate audit evidence in relation to the assertion identified in (b) above. (2+2+1+4=9 marks)