Finish all part of Question $1.$ It is a auditing problem under advance acount.

On $2$ February $2024,$ Jenny Wong, an audit partner of a reputable audit firm, Lee & Co$,$ was approached by the managing director, Tom Wong, who is also the major shareholder of a new audit Client, Red Computer Chips Limited $("$RED$"),$ to discuss the audit engagement for the financial year end $31$ March $2024.$

Planning meeting notes

RED runs a small business with one factory in Hong Kong for computer chips manufacturing and the wholesaling of computer chips. RED ordered computer chip production machines and equipment from Mainland China in February $2023.$ Due to the high demand of computer chip production line machines during that period, the purchase price was exceptionally high. However, Tom Wong had confidence in the sales of Hong Kong manufactured computer chips in Hong Kong, thus RED bought the chip production line machines and the packing machines. The arrival of the machines was in early April $2023.$ Unluckily, the quality of the machines was poor. All the machines did not function properly. Tom Wong has a friend who is an engineer, Jack Li$,$ has spent one month adjusting the machinery of the computer chip production line. After this adjustment, the production line worked as expected. No machine has been disposed of and all have been recorded in the accounting system. The company adopted a cost model to account for the machineries. The company started production in May $2023.$

RED is facing keen competition and there are few purchase orders from customers due to their price, which is higher than those of computer chips produced from Mainland China due to the high production cost. RED is now running at a small profit. To help with operating cash flow, the directors borrowed $$1$ million from the bank during the year. This is due for repayment at the end of $2024.$

Financial statement extracts for year ended $31$ March

Required:

$($a$)$ Calculate FOUR ratios, for BOTH years, to assist you in planning the audit of Red Computer Chips Limited.

$(4$ marks$)$

$($b$)$ Identify and explain FOUR audit risks, and explain the auditor's response to each risk, in planning the audit of Red Computer Chips Limited.

$(16$ marks$)$

$($c$)$ On $1$ April $2023,$ RED replaced its recycling vehicles. The old vehicles had a carrying amount of $$0\mathrm{.}8m,$ as recorded in the non$-$current assets register and were given in part$-$exchange against new vehicles costing $$1\mathrm{.}6m.$ Cash consideration of $$1m$ was also paid.

Determine the possible substantive procedures you should perform at the year$-$end to confirm the disposal of vehicles.

$(5$ marks$)$

$($Total $=25$ marks$)$