Parmalat Ltd has been struggling to recruit and retain skilled factory workforce. As a result, Parmalat Ltd decided to reward the staff in the most difficult-to-retain award categories with annual bonuses. The bonuses are calculated using a very complex formula that considers the employee's length of service, award rate, seniority, and estimated contribution to profit.

REQUIRED:

(a)Identify the key account at risk of misstatement and the two key audit assertions at risk.(3 marks)

(b)Outline the audit procedures you would perform to gather sufficient appropriate audit evidence on each assertion.(5 marks)