Modern Chair Company (MCC) is a medium sized company with locations across Ontario. MCC manufacturers modern office chairs which are made from recycled materials. ABC LLP has been chosen as the audit firm to perform the financial statement audit for MCC’s fiscal year end of March 31, 2020. The fiscal year for MCC is the period of April 1, 2019 – March 31, 2020. MCC follows International Financial Reporting Standards (IFRS), as the company has not ruled out the possibility of going public in the future. You, CPA, are a Senior Auditor at ABC LLP and you have been assigned as the lead auditor on the financial statement audit engagement for MCC for the year-ended March 31, 2020. On June 1, 2020, you meet with the Rick Warner, Audit Partner at ABC LLP in preparation for the upcoming audit engagement. “CPA, as this is a first-year engagement there are a number of tasks we need to you to perform to prepare for the March 31, 2020 audit of MCC. Specifically, we need to start the risk assessment process, which involves you to obtain an understanding of the entity and the environment, its internal controls and to assess the risk of material misstatement in the financial statements. This information will help us plan for the audit. Over the next week, please gather this information from performing inquiries, analytical procedures, inspection and observation and prepare a memo that summarizes the risks you have identified. In addition, for each risk you have identified, please explain the potential impact the risk could have on our audit. When documenting the potential audit impact, things to consider include if this increases the risk with specific balances or transactions, if we would need to perform additional testing in an area or any other considerations you feel are important to communicate”. Over the course of the next week, as advised by the partner, you perform inquiries, analytical procedures and inspections on the premises of MCC to gather information about the entity and the environment. You are now in the process of summarizing your findings to prepare the requested memo.