colas Drinks Inc. (Nicolas) manufactures fizzy drinks such as cola and lemonade as ft drinks and its year end is 31 December 2017. You are the audit manager of B&JCl eurrently planning the audit of Nicolas. u attended the planning meeting with the engagement partner and finance director I corded the minutes from the meeting shown below. You are reviewing these as part of t eparing the audit strategy. inutes of planning meeting for Nicolas Nicolas' sales resulis have been strong this year and the company is forecasting re million, which is an increase from the previous year. The company has invested sign cola and fizzy drinks production process at the factory. This resulted in expenditure on updating. repairing and replacing a significant amount of the machinery used in t process. As the level of production has increased, the company has expanded the number o it uses to store inventory. It now utilizes 15 warehouses; some are owned by Nico are rented from third parties. There will be inventory counts taking place at all 15 of the year end. A new accounting general ledger has been introduced at the beginning of the yea and new systems being run in parallel for a period of two months. As a result of the increase in revenue, Nicolas has recently recruited a new credi chase outstanding receivables. The finance director thinks it is not necessary b maintain an allowance for receivables and so has released the opening allowance of In addition, Nicolas has incurred expenditure of $4.5 million on developing a new soft drinks. The company started this process in January 2017 and is close to launcl product into the market place. The finance director stated that there was a problem in the mixing of raw materials within the production process which resulted in a large products tasting different. A number of these products were sold; however, due to : customers about the flavour, no further sales of these goods have been made. No ai been made to the valuation of the damaged inventory, which will stilil be held at cos at the year end. As in previous years, the management of Nicolas is due to be paid a significant based on the value of year-end total assets. The finance director has requested that the deadline for the 2017 shortened by a month and has asked the audit engagement partner tc this will be possible. The partner has suggested that in order to meet this deadline the firm may carry out both an interim and final audit. quired: 1. Using the minutes provided, identify and describe SEVEN audit risks, and explair response to each risk, in planning the audit of Nicolas Drinks Inc. (14 marks). 2. Explain the different between an interim and a final audit. (3 marks) 3. Explain the procedures which are likely to be performed during the interim au Drinks Inc. and the impact which it would have on the final audit. (4 marks)
