QUESTION 1

Your audit firm has been approached by a client TEMCO Sdn Bhd, asking for audit of its financial statements for the year ended 31 December 2020. TEMCO has already become a client of your firm for a non-audit service relating to implementation of its internal control system. As an audit manager, you are still considering whether to accept the new engagement, but your audit partner has given his consent by saying that he knows TEMCO's management very well and that there should be no problem in accepting the engagement.

Explain (with examples) 3 preliminary engagement activities that should be carried out first before accepting a new client.

QUESTION 2

Moving Forward Bhd is a local company in apparels and clothing, supplying relatively cheap priced stocks throughout Peninsular Malaysia. Recent Covid-19 pandemic has slightly affected its business although it has large customer base due to its cheap products.

The following is the ratio analysis for Moving Forward: