QUESTION 1 (15 marks) Your firm has been recently appointed as the auditor of Rumesh Sdn Bhd, a company that resells a variety of mobile phones through the internet. The company imports mobile phones from suppliers in the Far East and Europe. Currently, the company has more than one hundred models of phones available for sale. Each model is identified by a unique product code number. Customers place their orders directly via the internet and payment is made by credit card only. The company uses sales system software which automatically verifies order, customers' details and credit card information prior to the orders being approved and goods being dispatched. The company has existed for more than five (5) years and profits have been very good. Recently the company is under increasing pressure from suppliers in the Far East. Most of these suppliers have informed that there will be a 100% increase on the cost of mobile phones supplied by them. The new price is to take effect immediately. There is also pressure from the government for rising import duties for telecommunication products. As such, the directors of Rumesh Sdn Bhd are considering whether to move into new market areas. All directors and key management team of Rumesh Sdn Bhd are remunerated based on monthly profit generated by the business. You are the audit manager for this audit engagement, and you have just started planning the audit of the sales system of the company. Your firm has very little experience in this industry. Required: i. Explain the risk based approach to audit work. (5 marks ] ii. Identify and explain the term audit risk and its components. [ 4 marks ] iii. Identify and explain three (3) reasons why audit risk cannot be completely eliminated. [ 6 marks) Relate the question to risk/case study