Clif LLC manufactures window frames for residential and office premises. The fiscal year of Clif LLC ended on December 31, 2019. You are an audit senior and are in the process of planning an audit of your new client, Clif LLC. You have been given the notes from the audit planning meeting.

Clif LLC buys components for its frames in Germany and delivers this material to a central warehouse in Italy. The goods are in transit for 10 days and then arrive to the warehouse. Clif LLC conducts a monthly stock count of the material and, if any discrepancies are noted, adjustments are made in the month in which these discrepancies were found. At the same time, no additional stock counts are made at the end of the year. Clif LLC regularly updates the design of models of components for frames and brings new components to the warehouse. At the same time, the old component models, poorly in demand, the manufacturer sells to customers at low prices. Inventory closing balance at the end of the year contains the remainder of old models of components.

Clif LLC strengthened the work of the sales department in 2019 by introducing a bonus payment. With the introduction of this payment system, revenue from the sale of finished products increased by 25% for the last quarter of 2019. Accordingly, the level of accounts receivable for the 4th quarter also increased sharply. And the company's management became concerned about the creditworthiness of several customers.

The accounting policy of Clif LLC stipulates revaluation of the production building and equipment. Revaluation of the building and the equipment was completed for this year.

This year, a large bonus was also paid to 2 key managers of the enterprise, and information on these payments should be disclosed in notes in accordance with legal requirements.

Required:

A) ISA 300: The objective of the auditor is to plan the audit in such a way that it is conducted effectively. How does planning help to conduct efficient and effective audit? (6 points)

B) Identify SEVEN audit risks from the information provided and draw up audit procedures in response to these risks; (14 points)

C) Describe the substantive procedures that need to be performed in order to verify that the payment of bonuses to management is included in the financial statements. (5 points)

D) It was discovered during the audit that in January 2020 there was a slight fire in the administrative building, which was immediately extinguished, but led to significant damage of the stock count documents for December 2019. Describe how the lack of supporting documentation can affect the audit report. (5points)