Koftown Flowers operates 25 food supermarkets. The company's year- end is 31st December 2019.

The audit manager and partner recently attended a planning meeting with the finance director and

have provided you with the planning notes below.

You are the audit senior, and this is your first year on this audit. In order to familiarise yourself

with Koftown Flowers, the audit manager has asked you to undertake some research in order to

gain an understanding of Koftown Flowers, so that you are able to assist in the planning process.

He has then asked that you identify relevant audit risks from the notes below and also consider

how the team should respond to these risks.

Koftown Flowers has spent GHS1.6 million in refurbishing all of its supermarkets; as part of this

refurbishment programme their central warehouse has been extended and a smaller warehouse,

which was only occasionally used, has been disposed of at a profit. In order to finance this

refurbishment, a sum of GHS1.5 million was borrowed from the bank.

This is due to be repaid over five years.

The company will be performing a year-end inventory count at the central warehouse as well as at

all 25 supermarkets on 31st December. Inventory is valued at selling price less an average profit

margin as the finance director believes that this is a close approximation to cost.

Prior to 2019, each of the supermarkets maintained their own financial records and submitted

returns monthly to head office. During 2019 all accounting records have been centralised within

head office. Therefore at the beginning of the year, each supermarket's opening balances were

transferred into head office's accounting records. The increased workload at head office has led to

some changes in the finance department and in November 2019 the financial controller left. His

replacement will start in late December.

Required:

(a) List FIVE sources of information that would be of use in gaining an understanding of Koftown

Flowers, and for each source describe what you would expect to obtain.

(b) Using the information provided, describe FIVE audit risks and explain the auditor's response

to each risk in planning the audit of Koftown Flowers.