You have been presented with the following draft financial information about Efren Bata Reyes Ltd, a...

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You have been presented with the following draft financial information about Efren Bata Reyes Ltd, a very successful company that develops and licenses specialist computer software and hardware. Its non-current assets mainly consist of property, computer hardware and investments, and there have been additions to these during the year. The company is experiencing increasing competition from rival companies, most of which specialize in hardware or software, but not both. There is pressure to advertise and to cut prices. You are the audit manager. You are planning the audit and are conducting a preliminary analytical review and associated risk analysis for this client for the year ended 31 July 2021. You have been provided with a summarized draft income statement which has been produced very quickly and certain accounting ratios and percentages. You have been informed that the company accounts for research and development costs in accordance with IAS 38 Intangible Assets. Revenue Cost of Sales Gross Profit Distribution Costs Administrative Expenses Selling expenses Profit from Operations Net Interest Revenue Profit Before Tax Income Tax Expense Net Profit Dividends Paid Retained Profits Year ended 31 July, 2021 $'000 Earnings per Share Performance Ratios including the following: Selling Expenses Operating Profit INCOME STATEMENT Gross Margin Expenses as a percentage of revenue: Distribution Costs Administrative Expenses 15,206 3,009 12,197 3,006 994 3,002 5,195 995 6,190 3,104 3,086 1,469 1,617 Accounting Ratios & Percentages 0-43 0-80 Year ended 31 July 2020 $'000 0.20 0.07 0-20 0.34 13,524 3,007 10,517 1,996 1,768 274 6,479 395 6,874 1,452 5,422 1,439 3,983 1.04 0.78 0.15 0.13 0.02 0.48 Required: - a) Using the information given in the question identify THREE high risk areas for the audit and explain why they are high risk areas. b) For each high risk area identified, describe one audit procedure you would perform in response to those risks. You have been presented with the following draft financial information about Efren Bata Reyes Ltd, a very successful company that develops and licenses specialist computer software and hardware. Its non-current assets mainly consist of property, computer hardware and investments, and there have been additions to these during the year. The company is experiencing increasing competition from rival companies, most of which specialize in hardware or software, but not both. There is pressure to advertise and to cut prices. You are the audit manager. You are planning the audit and are conducting a preliminary analytical review and associated risk analysis for this client for the year ended 31 July 2021. You have been provided with a summarized draft income statement which has been produced very quickly and certain accounting ratios and percentages. You have been informed that the company accounts for research and development costs in accordance with IAS 38 Intangible Assets. Revenue Cost of Sales Gross Profit Distribution Costs Administrative Expenses Selling expenses Profit from Operations Net Interest Revenue Profit Before Tax Income Tax Expense Net Profit Dividends Paid Retained Profits Year ended 31 July, 2021 $'000 Earnings per Share Performance Ratios including the following: Selling Expenses Operating Profit INCOME STATEMENT Gross Margin Expenses as a percentage of revenue: Distribution Costs Administrative Expenses 15,206 3,009 12,197 3,006 994 3,002 5,195 995 6,190 3,104 3,086 1,469 1,617 Accounting Ratios & Percentages 0-43 0-80 Year ended 31 July 2020 $'000 0.20 0.07 0-20 0.34 13,524 3,007 10,517 1,996 1,768 274 6,479 395 6,874 1,452 5,422 1,439 3,983 1.04 0.78 0.15 0.13 0.02 0.48 Required: - a) Using the information given in the question identify THREE high risk areas for the audit and explain why they are high risk areas. b) For each high risk area identified, describe one audit procedure you would perform in response to those risks.

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Identification o High Risk Areas 1 Distribution Cost Distribution cost has increased by ... View the full answer