Question 1

Speedy Car (SC), a private company, is the echelon of all car rental agencies. It specializes in renting out unique vehicles. The owner of SC is high flying Bill (high flyer).Molson Daytona LLP has reviewed the annual financial statements since SC was founded five years ago. No issues were noted in performing the review engagement report for SC. You are the senior for the February 28^th 2021 year end.

High flyer is looking to expand operations to Vancouver and Halifax High Flyer would like to use the current year's financial statements to attract financing for the expansion and equity investors.

High flyer is wondering whether the current years financial statements should be audited.

High Flyer has been alerted that one of the employees is stealing cash. High Flyer has asked you if a regular audit engagement is likely to identify whether cash is being stolen and what additional procedures, if any, an auditor is likely to perform when fraud is suspected.

The company has experienced three years of operating losses.

Selected financial information is as follows:

Total assets$30,985,500

Total liabilities$21.682,350

Revenues$52,650,210

Gross margin$14,582,000

Net loss$150,210

Gross equity$36,088.100

Required

a.CAS 315 requires that auditors identify industry and firm specific risks as part of understanding the entity and its environment. Identify two firm specific risk and two industry risk that impact SC. - see CAS 315 as a reference

b.Determine an appropriate planning materiality

Discuss the users and their information needs, qualitative and quantitative factors and make a recommendation consistent with the key users and their information needs as it relates to materiality.

c.Discuss what would be an appropriate base for performance materiality. Be sure to fully support your final recommendation.