Auditing is a risky business. Many problems may arise during an audit. For questions 1. and 2. below discuss the primary risks involved in each scenario. Please be specific.

2. KPMX is a very large auditing firm. The Chairman of the Board of Endrun Corp., Tom Smith, wants to hire KPMX for its annual audit. However, Jane Green, the audit partner at KPMX knows that the turnover in the Accounting Department at Endrun Corp. is very high, and she also heard that the Endrun Corp. is poorly managed. Moreover, Endrun Corps. business is innovative and unique, and none of the auditors at KPMX have ever audited a company in that industry.