Long Beach Co. Ltd is a company engaged in the hotel sector. The company year end is 30 September 2020. You are an audit manager of Audit firm Ernst & Young Co and are currently planning the audit of Long Beach Co. Ltd for the first time since Long Beach Co. Ltd is a new client to your ofirm. You attended the planning meeting with the audit engagement partner and finance director last week. You are reviewing the minutes from the meeting as part of the process of preparing the audit strategy document and also reviewing ISA 315 Understanding the Entity and its Environment and highlighted two important paragraph as follows: ISA 315 Understanding the Entity and its Environment and Assessing the Risks of Material Misstatement requires auditors to obtain an understanding of the entity and its environment, including its internal control. ISA 315 Understanding the Entity and its Environment and Assessing the Risks of Material Misstatement states 'the auditor should perform . risk assessment procedures to obtain an understanding of the entity and its environment, including its internal control.

Explain the purpose of risk assessment procedures and what are the different risks that Long Beach Co. Ltd could be facing. (5 marks)