Beauty Nature Holdings Limited (BNHL) You are required to participate in preparing part of the Audit Plan (also called the audit planning memorandum). Note that this is an internal document used by the audit team. Assume you are the audit manager of Wong \& Co and are currently planning the audit of BNHL for the year ended 31 December 2022. Prepare an audit for the coming audit engagement (for the year ended 31 December 2022) solely based on the information given in the case. Beauty Nature Holdings Limited (BNHL) BNHL is engaged in manufacturing and trading of cosmetics and beauty products. BNHL's customers are mainly located in mainland China, Hong Kong and other Asian countries. During the year, BNHL expanded its operations from three to five sites. Fach site consists of retail shops, office and warehouse. Assume that you are the audit manager of Wong \& Co and are currently planning the audit of BNHL for the year ended 31 December 2022. BNHL is an audit elient newly accepted in current year. The acceptance procedures were all successfully completed. You have discussion with the management of BNHL to understand its business. BNHL is owned and managed by the Law's family. BNHL, was cstablishcd 15 years ago by Mary Law, Mary is BNHL's chief executive officer, owning 60% of the company shares with the remainder split cqually between ber brother and sister, Kevin Law and Carol Law. Kevin is the chicf financial director and Carol is the sales director. Mary is planning to sell her shares and retire from the business. Candy and Kevin will retain their shares and their board positions. After discussing with Carol, you noted that during the year 2022, the business of BNIIL remained stable in Heng Kong but expanded rapidly in China. BNHL maintained the same selling prices for all products as 2021 . The sales volumes in general increased by 50%, compared to that of 2021 . The gross and net profit ratios were maintained at a similar level to that of 2021. BNHL has increased significantly its scale of operation to cope with the business in China, with the acquisition of additional plant and equipment and an additional leased warehouse in place. The relevant expenses were recorded as administrative expenses. Extracts from censolidated statement of financial position of BNHL. as at 31 December Extracts from consolidated statement of profit or loss of BNHL for the year ended 31 December The extract from the meme prepared by an audit senior in preparation of the audit plan. Proposed engagement betwecn. Wong \& Co and BNHL. BNHL has invited Wong \& Co. to participate in an advisory project proposal related to operational effectiveness and efficiency review. The audit team and the advisory team are two separate teams with different reporting lines within Wong \& Co. The total noen-audit fees will double the andit fees for the year if the advisory project is accepted. Internal audit department During the year, the management of BHNL has set up an internal audit deparment. The audit senior proposes to use the work of internal auditors and place reliance on internal controls, which will reduce the amount of substantive testing which needs to be performed and proposes not to re-test the controls. Accounting department Due to wave of emigration, BHNL has seen a high turnover of accounting staff during the year. In particular, Mr Wong, the manager of the accounts department, has left early in the year to migrate to the UK. The position vacated by Mr Wong has been taken over by MrHo,who was previously the company's human resources department manager. Mr Ho has joined the company since its incorporation and is the nephew of Mary. He is considered to be trustworthy by the Law family. Intangible assets The intangible assets represents the capitalisation of research and development cost to develop natural skin care products for aged groups. These development costs include material costs, staff cost, depreciation of fixed assets and overhead costs incurred in the research and development centre. The demand for natural skin care products for aged groups decreased in 2022