Question 1

Explain the audit procedures toobtain evidence in relation to the revenue and inventory balance.

Question 2

You are responsible to audit Nano Co which the main business activity is selling bathroom. Sales are made to individual with the income being in the form of cash and debit cards. All items purchased are delivered to the customers using Nano's own delivery van. The Director of Nano's indicate that the company had difficult year after the Covid- 19 attack, but please to present some acceptable result to members. The Director is striving to obtain the leading market share of industry sales. Management and salesperson are compensated based on achieving this goal. Unfortunately, you realizes that the performance measure was unrealistic during current economic situation.

It was found out that there are several complaints by the customers regarding the faulty with the bathroom product. You are trying to get the previous year external auditor contact number to clarify on this matter. However, the CEO is not encouraging you to do so.

The following is the ratio performance for the company

	2019	2020
Inventory turnover ratio	3.8	2.3
Days to sell inventory	130 days	150 days
Account receivable turnover	8.4	10.9
Days to collect receivables	60 days	87 days

Require:

Identify the indicators that lead to high audit risk when auditing Nano Co. For each of the indicators, provide the auditor response in order to audit this company.