DigitalInnovations Inc. $($DI$)$ is a rapidly growing tech company specializing in developing innovative software solutions for the healthcare industry. Founded in $2015,$ the company has quickly expanded its operations across North America and Europe, boasting a diverse client base ranging from small clinics to large hospital networks. In its latest fiscal year, DI reported revenues of $$150$ million and net income of $$25$ million.

Ownership and Management:

The company is privately held, with the majority ownership split among the three founders, who also serve as the CEO, CTO, and CFO. The founders are highly experienced in the tech industry but have limited experience in managing a company of this size. The CFO, in particular, is relatively new to financial management, having transitioned from a technical role within the company.

Financial Reporting:

DI's financial statements are prepared in accordance with GAAP. The company's accounting system is managed internally, with the CFO overseeing the financial reporting process. Historically, DI has not had an internal audit function, and its financial statements have not been audited or reviewed by external auditors until now. The company is seeking its first audit due to plans for a potential IPO within the next two years.

Industry Environment:

The tech industry, particularly the healthcare software segment, is highly competitive and subject to rapid technological changes. Companies in this sector face significant risks related to cybersecurity, data privacy regulations, and the constant need for innovation. Additionally, healthcare clients are stringent about compliance with regulations such as HIPAA $($Health Insurance Portability and Accountability Act$)$ and GDPR$,$ and PIPEDA.

Key Financial Metrics:

Revenue Growth: $25\%$ year$-$over$-$year

Gross Margin: $60\%$

Net Margin: $16\mathrm{.}67\%$

Current Ratio: $2\mathrm{.}5$

Debt$-$to$-$Equity Ratio: $0\mathrm{.}4$

Required:

a$.$ Provide four client acceptance factors that are RELEVANT $($clearly show the alignment using case facts$).(4$ marks$)$

b$.$ Assess inherent risk of the client. State $3$ factors that support your rating. $(3$ marks$)$

c$.$ Determine detection risk and provide an explanation for your rating. $(1$ mark$)$

d$.$ Determine an appropriate basis for overall materiality $($explain users, objectives, and your recommendation$).$ It should be supported with clear facts. $(3$ marks$)$

e$.$ What is your performance materiality? $(1$ mark$)$