Health operates chemist shops in Perth. A large proportion of the sales transactions are conducted in cash. Health claims on having strong control policies and procedures in place to monitor the employees handling cash transactions and safeguarding the cash. However, the proper implementation of those policies had been questioned by the previous auditor. As Health is planning to expand to Mandurah and Busselton, it is applying for a bank loan to obtain additional funding for the expansion. Before approving the loan, the bank requires Health to provide them with an audited financial statement. The unaudited figures of current year suggest Health'srevenue to have increased significantly by 25 percent from last year while the gross profit appears to have increased marginally by 5 percent.

(a) Identify and discuss the risks that may arise from each of the above companies. In your explanation, please mention the components of the audit risk model affected.

(b)Identify how the audit plan will be affected and recommend specific audit procedures to address these risks.