Question 8 You are an audit senior in Abacus LLP, a medium sized firm of certified accountants and registered auditors in Southampton. This is the first-year audit of BH Healthcare Supplies Ltd, a new client. The company's year-end is 30th June 2021 and you are currently planning the audit of this client with the audit manager. BH Healthcare Supplies Ltd is a large company which operates a network of distribution channels in several European countries selling hospital Personal Protective Equipment (PPE). BH Healthcare Supplies Ltd purchases these PPEs from a major supplier in China who ships them to the company's central warehouse in the UK. The PPEs are usually in transit for up to two weeks and the company records the goods when received. The company does not carry out inventory count at the year-end but carries out monthly continuous (perpetual) inventory checks and any errors identified are adjusted in the inventory system for that month. In January 2021 the company introduced a bonus system for its sales staff based on how much each salesman sells. This initiative has so far proved successful and revenue has increased by 20%, especially in the last four months of the year. The level of receivables (trade debtors) is considerably higher than last year and there are concerns about the recoverability of receivables from some the customers. BH Healthcare Supplies Ltd has a policy of revaluing its land and buildings every few years, and this year a new valuation of all land and buildings has been carried out. During the year the directors have each been paid a significant performance related bonus. These amounts have been currently included within the wages and salaries figures in the draft income statement. You may assume separate disclosure of the directors' remuneration and bonuses is required by the Companies Act. Required: (a) Describe SEVEN audit risks, and outline the auditor's response to each risk, in planning the audit of BH Healthcare Supplies Ltd. (21 marks) (b) Describe substantive procedures you should perform to confirm the directors' bonus payments included in the financial statements. (4 marks) (Total: 25 marks)