Explain the PURPOSE of an audit engagement letter and list FOUR items which should be included in an audit engagement letter(4 marks)

(b)Explain WHY the following factors should have been considered by Orange & Co prior to accepting Scarlet Co as a new audit client. (5 marks)

Pre-acceptance Factors	Explanation
The Outgoing Auditors Response
Management Integrity
Pre-condition for an audit
Independence and Objectivity
Resources available at time of the Audit

(c)Describe EIGHT audit risks, and explain the auditors response to each risk, in planning the audit of Scarlet Co. (16 marks)

Audit risk	Auditors response

(d)Describe substantive procedures the auditor should perform to obtain sufficient and appropriate audit evidence in respect of the redundancy costs.(5 marks