2 Hydra Inc Your firm has been engaged to undertake a review of, and provide an assurance report on, the year-end financial information of the UK branch of Hydra Inc (Hydra), a company based overseas. The terms of the engagement include making enquiries of management, applying analytical procedures to the financial information and assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. Hydra manufactures specialised safety products for use in the petrochemical industry. All products sold by the UK branch are manufactured and supplied by Hydra Inc and the branch normally sells them at a mark-up of 50% on cost to the branch. However, customers who enter into an annual agreement to purchase all their safety products from the branch are charged a lower price. All customers are required to pay within 30 days but customers are offered an early payment discount if they pay within 14 days of invoice date. In previous years branch sales have increased steadily at rates between 5% and 8% per annum. You are preparing for your planning meeting with the finance director and have obtained, in advance of the meeting, a copy of the draft financial information for the year ended 31 October 20X6. Following your preliminary review, you have identified the following extracts from the financial information as matters of significance to discuss with management. Statement of profit or loss (a) Prepare planning notes on matters you wish to discuss, in respect of the information provided above, with management. Your notes should refer to the results of your analytical procedures. (14 marks) (b) Describe the level of assurance provided by your report following the review of the financial information of the UK branch of Hydra and explain how and why it differs from the level of assurance provided by a statutory auditor's report on the annual financial statements. (6 marks) (20 marks)