Carinal Ltd$.$ specializes in the development of electronic components within quite a competitive environment causing concerns for marketing and pricing. Its non$-$current assets primarily include IT software, property, and investments, and there have been additions to these during the year.

As audit manager, you are conducting a preliminary analytical review and associated risk analysis for this client for the year ended June $302022.$ You have been presented with the following draft financial information about Carinal with incomplete ratios and percentages calculation.

INCOME STATEMENT

Year ended June $30$

$20222021$

$$\text{'}000$ $$\text{'}000$

Revenue $2245018675$

Cost of sales $84758055$

Gross Profit $1397510620$

Distribution costs $42453120$

Administrative expenses $12762134$

Selling expenses $5555512$

Profit from operations $28994854$

Net interest receivable $1245495$

Profit before tax $41445349$

Income tax expense $21452345$

Net profit $19993004$

Retained profits $13252105$

Dividends paid $$1250$ $$1049$

Accounting ratios and percentages

Earnings per share $054125$

Performance ratios include the following:

Gross margin $(($Gross profit$/$revenue$)62\mathrm{.}25\%56\mathrm{.}87\%$

Expenses as a percentage of revenue:

Distribution costs $18\mathrm{.}91\%16\mathrm{.}71\%$

Administrative expenses $5\mathrm{.}68\%11\mathrm{.}43\%$

Selling expenses $24\mathrm{.}24\%2\mathrm{.}74\%$

Operating profit as a percentage of revenue $12\mathrm{.}91\%25\mathrm{.}99\%$

$1.$ By reference to the above, identify the areas that are subject to increased audit risk and describe the further audit work you would perform in response to those risks.