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Question: using the information provided, evaluate the business risks facing MRME to be considered when planning the final audit for the rear ended 31 December 201%. you have to provide valid reasons to support your Answers. Situation: Mr. John had been working in Japan for mancy scars as An executive chef of A famous restaurant chain in Japan. with his connection with scafand and beef sucdies in Japan, he started the restaurant business in Hong Kong through A camping called MarMar ("MRMR") Limited in carkey of 2017. He started buy renting two premises for his restaurants, one in wanchai and one in Sheung when. The restaurants offer A sophisticated dining copcriones. The emphasis is in high-qulites fand served in Lowrinus surroundings. Therefore, restaurants Are completely refurbished every two years. There is only one manager within the company, because Zahn believes that he can run the camping better than anyone else, and trusts no one but himself. That is why those that pain as managers tend to Leave fairly quickly As they have no real power to Achieve change. In Addition, John refused to meprint A finance director because he likes to keep control of financial matters himself. His son, MAR, who is now studying An accounting program at the city university of Hing King, helps John to prepare the Accounting records. Management Accounts Are produced irregularly. Shares in the camping are owned big John and his parents, who are not involved in the business decisions but has a seat in the board. There are two other non-executive directors, who are both friends of Zahn. The imported Japanese seafood and beef are welcomed bus most of the customers and so sales arad caddy. In January 2017, four more premises were rented to been new restaurants, too in Jordan and two in Kishin Ting. John clocated the sales continue to grow in the coming cars and so he entered A number of new agreements with the suediers to increase the volume of finds imported every month. He also recruited a lot of waiters and staff for the cppansion. However, some of the Japanese suediers were unable to fulfill MRMR's orders for high demand of why beef, SEA scallops and ANline. Therefore, John Substituted them with products from New Zealand And Australia. But his response to the shortage of Japanese suedies did not bring A significant increase to sales as customers did not like fand from other countries. Most customers dine at MRMR just because they love the Japanese fond. Therefore, there would choose other restaurants if no Japanese fand will be supplica you are the Audit manager in ABC Led. which is A CIPA firm responsible for the Audit of MRMR with Ancar ended 31 December 201%, you have recently attended a planning meeting with Mr. John, the director of the company. As this is the first racer that your firm will be Acting As Auditor for MRMR. A need to gain An understanding of the business risks facing the new client To help your business understanding, Mr. John had sent to you uptracts from the draft statement of comerchensive income, and the balance sheet, which are shown below. Page: TBalance Sheet as at 31 December ( Extracts) Income statement as at 31 December ( Extracts) year ended 31 Dec 2019 (unaudited) year ended 31 Dec 2018 ( audited) 2019 ( unaudited) 2018 (audited) ASSETS HK$000 HK$'000 HK$000 HK$1000 current Assets Revenue 153 , 472 336, 804 cash and cash equivalents 2, 560 37, 717 cost of goods sold - 88 , 872 - 160, 400 Trade receivables 260 840 64, 600 176, 404 Inventory 37, 260 27, 560 Depreciation -10100 -3/00 40,080 56, 192 salaries - 57, 600 - 26/400 Non-current assets Rental expenses -47, 200 - 27,000 property, plant and equipment-cost 561520 23,000 Administrative expenses -27,000 - 14, 400 Accumulated depreciation 17,400 6,800 Operating (loss)/ profit -72, 800 110, 204 39, 120 16, 200 Total assets 71, 200 72, 397 Dividend paggmen -76,000 ( Loss)/ profit for the year - 72, 800 34, 204 LIABILITIES AND EQUITY current liabilities Trade parables 50,828 14 , 188 Borrowings 27, 712 Total current liabilities 73,100 14 , 188 Non-current liabilities Borrowings 16, 194 Total liabilities 19, 796 14 , 188 Equity share capital 12,000 8,000 Accumulated ( losses)/ profits - 27 , 596 50,204 Total equity -10, 57 58 204 Total liabilities and Equity 71,200 72, 392 page: 2