(e)Assess and explain the risks of material misstatement relating to the occurrence assertion of RWs revenue for the year ended 31 December 2021. (5 marks)

Question 1 (25 marks) You are the audit manager for the financial statements of Red Wood Furniture Limited ("RW") for the year ended 31 December 2021. RW is a furniture manufacturer registered in Hong Kong. It runs a factory in Dongguan, China. During the planning stage of the engagement, you obtain the following financial information from RW: Amount in 2021 Financial statement item Amount in 2020 (HK$'000) (HK$'000) Revenue 525 Cost of Goods Sold 350 Gross Profit 175 PPE 425 Account Receivables 232 Account Payables 155 285 242 43 495 75 105