B. Haziq a senior auditor in charge is called upon to audit client, Momo Motors, which manufactures and supplies automobile parts all over the country. During the financial year 30 June 2019, the company had expanded its operations by opening new sites in a few strategic locations across the country. Mid-January the management appointed an experienced chartered certified accountant to set up an internal audit department. However, by April 2019, the company reported a negative cash flow for the year with sales Auditing II (Bachelor of Accounting (Hons)) October 2020 CONFIDENTIAL 4/5 going down in one of its sites due to the fierce competition in the automobile industry and with the slow economic development in the country. An extensive range of spare parts is held, for which perpetual inventory records are kept, but no continuous checking is conducted by the storekeeper. Meanwhile car servicing and body repairs are carried out in workshops by employed and sub-contracted service engineers where most jobs are stated and finished in a day, but the invoice are immediately prepared upon completion. In last financial year end the company had also faced a change in the management with the resignation of the company's CEO Mr. Hans Matsu. Required: i. Using the information provided, identify, and explain the audit risk to be addressed when planning the final audit of Momo Motors for the year ended 30 June 2019 (8 Marks) B. Haziq a senior auditor in charge is called upon to audit client, Momo Motors, which manufactures and supplies automobile parts all over the country. During the financial year 30 June 2019, the company had expanded its operations by opening new sites in a few strategic locations across the country. Mid-January the management appointed an experienced chartered certified accountant to set up an internal audit department. However, by April 2019, the company reported a negative cash flow for the year with sales Auditing II (Bachelor of Accounting (Hons)) October 2020 CONFIDENTIAL 4/5 going down in one of its sites due to the fierce competition in the automobile industry and with the slow economic development in the country. An extensive range of spare parts is held, for which perpetual inventory records are kept, but no continuous checking is conducted by the storekeeper. Meanwhile car servicing and body repairs are carried out in workshops by employed and sub-contracted service engineers where most jobs are stated and finished in a day, but the invoice are immediately prepared upon completion. In last financial year end the company had also faced a change in the management with the resignation of the company's CEO Mr. Hans Matsu. Required: i. Using the information provided, identify, and explain the audit risk to be addressed when planning the final audit of Momo Motors for the year ended 30 June 2019 (8 Marks)