Kruger's Furniture and Plastics Company Kruger's Furniture and Plastics Company (KFP) was founded in Springwood, Ontario in 1984 as a small, family-owned furniture store. The founder, Freddy, began operating the business in his basement building original hand carved outdoor furniture. Through trial and error, Freddy discovered that through a strong heating process, he was able to mold plastic into various furniture pieces. He never commercialized the process however since he lacked the large-scale equipment and plastics to make it commercially viable. Freddy's wood furniture business continued to grow and by 1999, KFP had moved to a facility on Elm Street in the north end. Freddy's son Fred took over the business in 2005 and is currently the President of the company. Freddy, although retired, continues to have a hand in the business. Fred completed a degree in chemical engineering and takes a hands-on approach to the business. He can often be found in the research and engineering room investigating new methods to produce outdoor furniture and products that can withstand Canadian winters and summers. You are the senior accountant in charge of the audit of KFP for the year ended December 31, 2020. Your firm, BBJLLP have been the auditors of KFP for the past five years, but this is your first year on the engagement. Although KFP is a private company, it made the decision to report using IFRS and has always had an unmodified audit opinion. It is now November 1, 2020, and you have been asked by your audit partner to prepare the audit planning memo for KFP. All pre-engagement procedures such as independence and client continuance have been completed so you can focus your time on all the specific aspects that go into the planning of the audit. This includes an analysis of inherent and control risks, detection risk and materiality recommendations. In addition, there should be a discussion of the accounting and audit issues that may arise out of your examination of the information. While audit procedures are not required at this stage, your partner would like you to discuss concisely, how you believe your firm will gather the audit evidence for the issues that you identify. It is imperative that you include in each of these discussions the key audit assertion(s) you are concerned about. Your partner has reminded you to focus on the KEY assertions that you believe are attached to each of the issues that you discuss. Finally, you should begin drafting a management letter by drafting three points that you noted during your analysis.

Appendix I: Selected Financial Information] Kruger's Furniture and Plastics Company Selected Statement of Earnings Information To Nov 1, 2020 December 31, 2020 2020 (unaudited) audited Wood furniture revenues 9,256,500 8,650,000 Plastic furniture revenues 13,826,250 15,876,000 Plastic product revenues 1,382,250 2,300,000 Other revenue 56,250 Cost of goods sold - wood furniture 7,868,025 6,487,500 Cost of goods sold - plastic furniture 9,954,900 10,795,680 Cost of goods sold - plastic product 414,675 414,000 Salaries and wages 2,149,009 3,245,987 Repairs and maintenance 33,750 192,000 Research and development expense 144,000 234,000 Loss from warehouse fire 82,500 Miscellaneous expense 165,000 98,000 Utilities expense 73,500 65,000 Income before tax 3,084,000 4,763,800 Income tax expense 478,020 738,389 Kruger's Furniture and Plastics Company Selected Statement of Financial Position Information To November 1 December 31, 2019 2020 (unaudited) audited Cash 345,000 980,000 Accounts receivable 4,904,000 2,682,000 Inventory 1,834,000 3,210,000 Property, plant and equipment 9,876,555 7,645,000 Research and development 1,456,000 867,000 Accounts payable 1,340,000 989,000 Long-term debt 2,500,000