Ecopak is a small but growing private company in Ontario that produces containers for take-out food and sells to a small number of customers in the wholesale market. The company has been in business for several years and is owned by four people (Nina, Mike, Cam, Zhang), three of which are members of management, and all are on the four-member board of directors. The percentage of ownership is effectively 5%, 22.5%, 22.5%, and 50% respectively. The company has a simple production model. It buys plant-based material in bulk, hydrates it, and pours it into moulds to form containers. This requires some investment in equipment and specialized training but, is otherwise a simple process. Over the years the company has experienced 'growing pains' with management development and Information System integration. However, most of these issues appear to be resolved. As Ecopak continues down the path of continuous improvement. It has implemented a partially automated ERP system for incoming revenue transactions (POs) but still employs manual processes in areas such as discount calculation, payroll, allowance for doubtful accounts and other non-standard transactions. The company has been audited in the past but is now considering Initial Purchase Offer ( IPO). Therefore, a new auditor has been sought out as the company considers going public. Tariq has recently become an audit partner on the Ecopak engagement. He has performed the required pre-engagement activities and is ready to proceed to write the engagement letter and prepare his risk assessment and materiality section of the audit plan.

a . List and explain the four primary content sections Tariq would include in the engagement letter.

b. Define the components of the audit risk model and describe how they are related to each other and the other sections of an audit plan?

c. With reference to the Ecopak case, list and explain factors that increase or decrease engagement risk. How would Tariq use this information in his audit plan?

d. With reference to the Ecopak case, what materiality factors should Tariq consider? Prepare the materiality calculation in accordance with the Canadian Audit Standard.