1. You are the audit seniors on KCC Ltd, a profit-oriented organisation with revenue of $33,500,000; total assets of $75,975,000 and profit before tax of $12,350,000 for the year ended 30 June 2021. Control risk is assessed as low and the client has a history of no, or limited misstatements identified by the auditor. Required Your audit manager has asked you to make a preliminary determination for performance materiality, without considering any qualitative factors. (4 marks) 2. As the audit manager in the planning the audit of Arries Ltd, a medium sized distributor of pharmaceutical drugs you have obtained the following information from your planning meeting with the Managing Director (MD) and Chief Financial Officer (CFO); as well as from your review of the board minutes: Both the MD and the CFO were excited to inform you that the company is intending to do an initial public offering (IPO) before the year end. For the current year, the company has undergone several changes, including the resignation of a few key staff member. In fact, they were without a Finance Manager for three months. In addition to staff changes, the client implemented a commission-based incentive for sales representatives to motivate and retain them. As part of your risk assessment analytical procedure you noted that accounts receivable days has increased from 30 days to 65 days. There were no changes to the credit terms offered to customers. You also noted that inventory tumover decline from 7 times in prior year to 3 times in the current year. The audit senior on your team is new to your audit firm and as you review the staff allocation done by the audit senior, you noticed that she has a junior team member responsible for reviewing the trainee's work. Required a) From the information provided describe FOUR audit risks you should consider as you plan the audit of Arries Ltd. (4 marks) b) As the audit manager, explain what the likely response is to each risk identified in (a) as you plan the audit of Arries Ltd. (4 marks)