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THE FOLLOWING IS A SERIES OF 13 QUESTIONS FOCUSED ON RISK ASSESSMENT, THE AUDIT RISK MODEL AND AUDIT PLANNING. [Answer each question by inserting your ANSWER within the question box] The following is a partial balance sheet an auditor is examining during the planning phase of an audit of the 2019 Land's End financial statements. Land's End Dec 31, 2019 Dec 31, 2018 Statement of Financial Position ($1,000s] Cash $193.405 $ 194,581 Restricted cash 1,948 2,356 Accounts receivable.net 34,549 49,860 Inventories, net 321,905 332,297 Prepaid expenses 56,574 26,659 Total current assets 608.381 606,753 Property and equipment 149,894 136,501 Goodwill 110,000 110,000 Intangible asset 257,000 257,000 Other assets 5,636 13,881 Total assets 1.130.911 1,123,135 Planning Phase Assumptions and Analysis: Assumptions 1: The target maximum acceptable audit risk (AR) for the Land's End audit is 0.08 or 8% risk Assumption 2: The initial, beginning of the audit, estimated risk of material misstatement (RMMJ is 0.22 or 22% risk Assumption 3: The tolerable error (tolerable misstatement for each account within the statement of financial position balance sheet) has been set at $ 10,000,000 for $10,000 in $ 1,000s). Question 7 ( 10 pts]: Recall that the ARM could be updated or revised each time the auditor discovers new audit relevant evidence such as the evidence highlighted in the above balance sheet. Considering the trend evidence concerning Prepaid Expenses, which ARM variable(s) need to be revised (updated) and what is the direction of the revision given this new evidence? THE FOLLOWING IS A SERIES OF 13 QUESTIONS FOCUSED ON RISK ASSESSMENT, THE AUDIT RISK MODEL AND AUDIT PLANNING. [Answer each question by inserting your ANSWER within the question box] The following is a partial balance sheet an auditor is examining during the planning phase of an audit of the 2019 Land's End financial statements. Land's End Dec 31, 2019 Dec 31, 2018 Statement of Financial Position ($1,000s] Cash $193.405 $ 194,581 Restricted cash 1,948 2,356 Accounts receivable.net 34,549 49,860 Inventories, net 321,905 332,297 Prepaid expenses 56,574 26,659 Total current assets 608.381 606,753 Property and equipment 149,894 136,501 Goodwill 110,000 110,000 Intangible asset 257,000 257,000 Other assets 5,636 13,881 Total assets 1.130.911 1,123,135 Planning Phase Assumptions and Analysis: Assumptions 1: The target maximum acceptable audit risk (AR) for the Land's End audit is 0.08 or 8% risk Assumption 2: The initial, beginning of the audit, estimated risk of material misstatement (RMMJ is 0.22 or 22% risk Assumption 3: The tolerable error (tolerable misstatement for each account within the statement of financial position balance sheet) has been set at $ 10,000,000 for $10,000 in $ 1,000s). Question 7 ( 10 pts]: Recall that the ARM could be updated or revised each time the auditor discovers new audit relevant evidence such as the evidence highlighted in the above balance sheet. Considering the trend evidence concerning Prepaid Expenses, which ARM variable(s) need to be revised (updated) and what is the direction of the revision given this new evidence
