Question 5 (22 marks, 60 minutes) You are the auditor in charge of the financial statement audit of Natural Stones Limited (NSL) for the year ended December 31, 2015. NSL, a private company formed in 1993, manufactures and sells natural and polished bricks and stones to small retailers and builders around the city of Toronto. This is the first year that your firm is auditing NSL the firm had contacted the predecessor auditor and performed client acceptance procedures. It is now March 2016. The following are highlights from a meeting you recently had with the NSL engagement partner: 1. NSL's main competition consists of other American and Canadian stone manufacturing companies who distinguish themselves on lower prices because of a mass distribution network. 2. NSL's net income has fallen in recent years because it lost several large sales, due to market downturn. The market conditions have caused a decline in housing sales and many builders have been unable to sell their existing inventory of houses and condominiums constructed in last couple of years. As a result, a large number of builders have been unable to keep-up with their debt obligations and have been forced into bankruptcy. 3. NSL is expecting that lower interest rates will increase housing sales and cause an increase in the demand for brick and stone. However, to date, NSL has not secured any new significant sales contracts for brick or stone. Revenue and net income (loss) before income taxes -information for NSL's last five years are: Question 5 (22 marks, 60 minutes) You are the auditor in charge of the financial statement audit of Natural Stones Limited (NSL) for the year ended December 31, 2015. NSL, a private company formed in 1993, manufactures and sells natural and polished bricks and stones to small retailers and builders around the city of Toronto. This is the first year that your firm is auditing NSL the firm had contacted the predecessor auditor and performed client acceptance procedures. It is now March 2016. The following are highlights from a meeting you recently had with the NSL engagement partner: 1. NSL's main competition consists of other American and Canadian stone manufacturing companies who distinguish themselves on lower prices because of a mass distribution network. 2. NSL's net income has fallen in recent years because it lost several large sales, due to market downturn. The market conditions have caused a decline in housing sales and many builders have been unable to sell their existing inventory of houses and condominiums constructed in last couple of years. As a result, a large number of builders have been unable to keep-up with their debt obligations and have been forced into bankruptcy. 3. NSL is expecting that lower interest rates will increase housing sales and cause an increase in the demand for brick and stone. However, to date, NSL has not secured any new significant sales contracts for brick or stone. Revenue and net income (loss) before income taxes -information for NSL's last five years are