ESINAM PLC You are the audit senior for Mensah & Co Chartered Accountants and Esinam Plc is a longstanding audit client of your firm. You have started the planning for the audit of Esinam Plc for the year ended 31 May 2023. You have obtained the following information from the previous years file and from preliminary discussions with management. Background and revenue sources Esinam Plc is a magazine publisher. It publishes a number of titles, all of which are weekly or monthly car and motorcycle magazines. The magazines are sold to supermarkets and newsagents who then sell them to the general public. Esinam Plc generates its income in two ways; from the sale of the magazines themselves and from selling advertising space in the magazines to companies who want to promote their cars or motorcycles. The revenue split has typically been around 50% in total for each sale type. The key advertisers are large household names in the car and motorcycle industry. Esinam Plc has to negotiate contracts with these advertisers for the provision of advertising space. These contracts can vary in length and can range from between one month and six months. The contract will set out all details of the arrangement including the price of the adverts, the number or size of the adverts and how often the advertisements will appear. An invoice is raised on the date of the first advertisement and the advertisers pay within ten days of this for shorter contracts. For six month contracts the advertising fees are paid for by Turbos customers in two instalments (half of the fee on the first date of advertising and the rest after three months). If recurring contracts have not been re-signed by the date advertising is meant to start Esinam Plc raises an invoice based on the last contract and the paperwork is sorted out later. A few of the larger contracts run up to 31 May 2023 In respect of the magazine sales Esinam Plc offers the supermarkets and newsagents up to 45 days credit but many of the newsagents are struggling financially and tend to take longer than this to pay their invoices. Trading conditions In the last ten years the market for the magazines has become more and more competitive resulting in Esinam Plc needing to discount magazine prices. There is also increasing pressure from online competition and Turbos Revenue has been gradually decreasing over the last few years. This year has been a particularly bad year because difficult economic conditions have resulted in reductions in advertising revenue as many of the car and motorcycle manufacturers that advertise in the magazines have seen their marketing budgets slashed and have renegotiated their contract terms. Other relevant information Esinam Plc does not employ journalists or photographers for their magazines. Instead they use the best self-employed journalists, commentators and photographers in the industry. However due to their numerous commitments these freelancers often get behind on their paperwork and dont get round to sending in their invoices to Esinam Plc until a month or more after they have written their article or provided the photos requested. Esinam Plc prints its own magazines and as a result has a significant amount of plant and equipment. Esinam Plc has been around for a number of years now and the equipment had become quite old and inefficient compared to that used by newly formed competitors. As a result in December 2022 extensive refurbishment of the printing equipment took place and this expenditure will be material to the financial statements. The heavy investment in refurbishment and declining revenues has seen Esinam Plc operate close to its overdraft limit during the last six months. Although there is likely to be a small profit for the year, the management accounts for last six months show an operating loss. The company would like to apply for a bank loan to ease cash flow concerns and has discussed this with its bank. However the initial response from the bank was not overwhelmingly positive due to the competitive market Esinam Plc operates in. As a result Esinam Plc needs to produce a cash flow forecast for the bank showing where the cash will be generated to pay back any loan. The bank also wants to see audited financial statements for the year to 31 May 2023 before the end of June 2023. The forecasts currently being put together will include Esinam Plcs plan to make popular titles available to the public online in exchange for a subscription fee. Online advertising fees will also be included in the forecast. However the website will need to be quite complex and the investment in it will be significant. Required Using the information provided, describe EIGHT audit risks and explain the auditors response to each risk in planning the audit of Esinam Plc.