Question 1 (15 marks): 1.1. You are the auditor at Alice Chartered Accounting (ACA) and have been assigned to the audit of Kids Foundation Ltd (Kids Foundation) for the year ended 30 June 2020. Kids Foundation, a Melbourne-based listed company, manufactures computer accessories and exports these to manufacturers in Thailand and Vietnam. These markets have grown rapidly over the past two years and have become the company's most significant customer base, representing 90 per cent of Kids Foundation's revenue. All overseas sales are recorded based on the date of shipment and are settled in US dollars 45 days after the date of shipment. However, based on the contract customers only accept the risk associated with the goods when they receive the good at their local ports. In addition, the USD/AUD exchange rate has significantly fluctuated for almost one year so far. In recent months, a Vietnamese competitor has just entered these markets, offering the same type of products at a lower price to Kid's Foundation's existing customers. As a result, in the past two months, the volume of orders from customers in Thailand and Vietnam has fallen 30 per cent. In the meantime, three major customers have requested payment terms to be extended to 90 days after the date of shipment. Required: (a) Identify two accounts on the statement of financial position that are at risk of material misstatement and provide a brief explanation of why each is at risk (6 marks) (b) Identify the key assertion that is affected for each account identified in (a). (2 marks) (c) For each of the accounts and the associated key assertions you identified above, recommend a specific substantive test of detail that would be most responsive to the risk identified (4 marks). 1.2. The following is a material situation: A client changes its method of accounting for the cost of inventories from FIFO to weighted average. As the change has a material effect on the financial report and has not been disclosed as required by Australian accounting standards, the auditor requests the client's management to disclose the information but the request was rejected by the client. Required: Indicate the type of audit opinion you would issue, as well as the reasons for issuing the particular audit opinion. (Limit your answer to 40 words)