Advanced Auditing - ACF3003 (5) SECTION A (COMPULSORY) Question 1 (25 marks) ComFirst Co Ltd produces computer software for specialists in the field on accounting and auditing. The company is a family and has been in operation for the last eight years. ComFirst has expanded quite rapidly due to its high-quality product and has invested more than Rs20m in its total assets. The company supplies its products to the local markets via some twenty retail outlets across the country. The company also markets its products on overseas market, but the distributors must operate under a specific licence renewed every three years. The cost of the licence depends on the expected sales in the country to which it relates. The licence fees receivables by the company is spread over the period of the licence. ComFirst prepares its financial statements on 30 June each year. On November 2017, ComFirst was listed on the Stock Exchange to get access to more capital. However, the family members have retained 30% of the shareholdings and the remaining shares have been issued to the public. As a listed company, ComFirst has already established an internal audit department but it is not operational as no one has yet been appointed as internal auditor. There is only one non- executive direct on the board. The management of the company is very much concern with these situations and seek to address them in the forthcoming months. As the audit manager of AB Associates, an audit firm, you have been assigned to the audit of ComFirst Co Ltd for the financial year 30 June 2018. You will do the audit of ComFirst for the first time as it is a new client of your firm. Required: (a) As the audit manager, discuss the matters that you would raise at the audit planning stage that would be useful for both the audit engagement and overall audit strategy. (b) [10 marks] Identify and evaluate the audit risks that should be considered in planning of ComFirst. Page 1 of 4 [15 marks]