Background information Group Operations The group has a head office in Manchester, they operate ships with three main categories which aims to give their passengers a wide range of cruise experiences with a variety of choice in terms of destinations. Theses cruises usually last for about 3 weeks although some can last for 9 weeks. The following is the information regarding the 3 main brands that are being operated by the Group:

1. Sunbath Cruises These cruises visits the beach destinations such in Africa, South America and Europe

2. Exposure Cruises they focus on visiting big cities as well as landmarks around the world

3. The pioneer Cruises- They focus in visiting those countries with natural beauty such as Alaska Sunbath Cruises The previous financial period, the Group used about $85 million for the sole purpose of maintaining and upgrading the Sunbath cruise ships. For the sake of maintaining the good reputation, the luxury ships should adhere to a very high standard, therefore regularly the Group incur high expenditure in order to maintain them. A number of these ships has also been refurbished by installing other entertaining facilities like gyms as well as cameras. The companys policy is that the gym equipment will need to be replaced after every 2 years.

Exposure Cruises The Exposure Cruise ships, are the oldest but the most luxurious in the whole fleet of the company and they are gradually these ships with new ships. This financial period, the Group will introduce 2 new ships costing $115 million. These 2 ships took about 4 years to build and were constructed by Venture Ltd, a company that is not owned by the Group. However, it is said that the chairman of the Group, Maxwell Dracon, is also the chairman of Venture Ltd, and his son is the CEO of Venture Ltd. The purchase of the 2 ships was finance by a $115 million loan with a fixed interest rate of 8% There are other 3 ships that are being constructed by Venture Ltd. The group has also taken out a loan of $135 million with a fixed interest rate of 7% to finance this project

The Pioneer Cruises They are growing in terms of popularity. The Group has also acquired an operating licence from the local governments so that they can be able to visit certain destinations. The cost of licence that was acquired was capitalised as an intangible asset.

Additional Information Selected financial information Note Projected to 30 July 2020 Projected to 30 July 2019 $ million $ million Group Revenue 1 864 770 Operating Profit 245 201 Profit before tax 91 75 Total Assets 2800 2780 Included in total assets: Intangible assets- operating licenses 2 66 67 Property, Plant & Equipment 3

Note 1 The revenue of the company includes the sales from the tickets which contributes about 86% of revenue. The customers pay 25% deposit, refundable when booking for the cruise, which is initially recognised in the financials as deferred revenue. The 75% balance is paid 7 weeks before the cruise commences and at that point, it is also recognised in the Groups financials as deferred revenue.

It is also worth noting that the full amount of the price of the ticked is transferred to revenue when the cruise starts its journey regardless of the duration taken by the cruise. The remaining 14% of revenue of the Group comes from the sale of food and drinks as well as other entertainment. The Group management, monitor this revenue stream closely because it achieves a high profit margin and the staff are encouraged to maximise the sales to customers.

The Groups revenue is presented on segment basis as follows:

Revenue per operating segment Projected to 30 July 2020 Projected to July 2019 $ million $ million

Sunbath Cruises 320 288

Exposure Cruises 280 290

The Pioneer Cruises 264 192

Total 864 770

Note 2 The operating licences are taken from the local governments so that the Pioneer Cruise will be able to visit other destinations. The licences are also amortised.

Note 3 Property, Plant & Equipment is as follows:

Property, Plant & Equipment Projected to 30 July 2020 $ million Projected to 30 July 2019 $ million

Ships in usage 3041 3010

Ships being constructed 93 72

Other P.P.E 2803414 2733355

Accumulated depreciation 884 835

Carrying amount 2530 2520

Information from Audit team notes from the meeting The audit team had a meeting in which the audit partner discussed several issues as follows:

Cyber-security attack In the past month, the Group experienced a cyber-attack whereby personal information of 1600 clients, including their debit card and credit card details were stolen. The issue that led to the cyber-security attack to happen has not yet been resolved.

Other developments affecting Pioneer Cruises Last month, the local governments of some countries where Pioneer cruises visits, withdrew their operating licences with immediate effect. The governments who withdrew the licenses stated that it is a temporary measure so that they limit the number of tourists visiting their natural beauty areas.

Other social and environmental information The Group has asked your auditing firm Pyrod Ltd, if you can provide additional service, of advising the management on the issue of how to measure environmental and social information which is supposed to be published on the Groups public website and it is also a requirement of the law for the Groups industry to publish and also submit this information to the regulatory authority.

Taking into consideration that this assignment is urgent, because the deadline for submission to the local authority is in 2 weeks, therefore the Group has stated that they are willing to pay a high fee for this.

Required:

a. Identify and explain audit risks, to be considered when planning the Group audit. (25)

b. Evaluate the audit procedures that can be undertaken on the audit of revenue of the three segments revenue. (5)

c. In relation to the social and environmental engagement, evaluate the matters that should be considered whether Pyrod Ltd should accept the engagement. (10) d. Briefly explain the use of audit data analytics in relation to auditing. (5)