Question No 3: Race Co is a large company and a leading manufacturer of sporting bikes. Owing to increasing demand for its products, the company has significantly increased its scale of operations over the last 12 months. This has resulted in a bigger workforce and expansion of its resources (factory building and offices among others). Using various financing methods, since January 2018 Race Co has also invested heavily in replacement and additional plant and machinery Page 3 of 4 As a part of the audit team engaged on the audit of the company's financial statements for the year ended December 31, 2018, you recently attended an audit planning briefing meeting. At the meeting, your audit manager confirmed that your firm would adopt a risk-based approach to the audit of the financial statements and stated that the area of tangible non-current assets is of high inherent risk. Your manager also acknowledged that in arriving at a conclusion for certain arcas of the financial statements your firm may need to rely on evidence provided by experts, Required: State the objective of a risk-based approach to the audit of financial statements and explain how it is used to direct audit resources to areas of high financial statement risk Your answer must include a detailed discussion of three components of audit risk (10 marks) b Identify and explain FIVE inherent risk factors that you would associate with the non- current assets area of the financial statements of Race Co. (15 marks)