The case company is JUMBO Group Limited and its subsidiaries ("the Group"). The Group has a portfolio of several F&B brands including its anchor brand, JUMBO Seafood, operates 4 Tsui Wah Hong Kong-style "Cha Chaan Teng" outlets as a franchisee in Singapore and coowns the Singapore Seafood Republic brand which has 3 outlets, operated under the franchise model in Japan. Up to the end of July 2022, JUMBO has more than 45 F&B outlets (including those of its associated companies and those under licensing arrangements) in 12 cities in Asia.

To maintain the quality and consistency of the signature dishes and lower the cost via centralisation, the Group has established their Central Kitchen in Singapore in 2008.

You are expected to research for additional relevant information (such as the Group's strategy, operations, risks, and financial information) from public sources of information, for example its 2021 annual report, 1H2022 financial statements and announcements.


Financial Performance in the year ended 30 September 2021 (FY2021)

In FY2021, the Group reported:

• Revenue of $81,790 thousand, 16% drop from FY2020.

• Raw materials and consumables used reduced to $30,936 thousand, 14% drop from FY2020.

• Loss before tax of $14,885 thousand, 49% increase compared with the loss before tax in FY2020.

Besides, the Group also:

• Acquired 75% of the issued share capital of Kok Kee Wanton Noodle Pte., for a consideration of $2,100 thousand. Goodwill of $1,814 thousand is allocated to this cash-generating unit.

• Closed several outlets: JUMBO Seafood at The Riverwalk, both Ng Ah Sio Bak Kut Teh (NASBKT) and Seafood Republic at Resort World Sentosa and JUMBO Seafood outlet in Taichung. NASBKT in Resort World Sentosa and JUMBO Seafood outlet in Taichung were non-performing before closure.

• Increased bank borrowings (short-term and long-term) from $2,133 thousand at the end of FY2020, to $15,349 thousand at the end of FY2021.

• Increased short-term investments of financial assets from $343 thousand at the end of FY2020 to $8,847 thousand at the end of FY2021, as the Group placed bank borrowings that are pending deployment to operations or investments, to generate returns to offset interest expense.


Selected events after 30 September 2021

The Group's half-year financial statements for the period ended 31 March 2022 (1HY2022) reported a revenue of $49,591 thousand, 9.2% increase from the half-year ended 31 March 2021 (1HY2021). However, its loss before tax widened to $4,420 thousand, 4.6% increased from 1HY2021.

 
To achieve its strategy to "Bonding People Through Food", the Group has expanded a few outlets, including but not limited to:

• JUMBO Signatures, at The Shoppes at Marina Bay Sands, occupying 3,326 square feet, in January 2022.

• Its second and third franchised JUMBO Seafood outlet in Ho Chi Minh City, Vietnam, in March and May 2022, respectively.

• 7 New Kok Kee Wanton Noodle stalls up to the end of July 2020.

 
With Singapore's ease of various Covid-19 measures, in particular social group sizes and social distancing requirements, effective from 26 April 2022, the management expected more revenue generated from the outlets. The management also expected that allowing 100% of workforce to return to office would offer more potential for their business within the CBD area.

 
Employee benefits expenses increased by 4.6% from $17.6 million in 1H2021 to $18.4 million in 1H2022, mainly due to bonus payment in 1H2022 compared to no bonus pay-out in 1H2021.


Short-term investment further increased to $14,615 thousand at 31 March 2022.


Bank borrowings further increased to $18,623 thousand (short-term: $4,474 thousand and longterm: $14,149 thousand) at 31 March 2022.

Required:

(a) Analyse the risks that the Group faces for the year ending 30 September 2022 in each of the following business processes:

• Human Resource Management process, and

• Financial Management processes.

When analysing the risks, you might consider impacts from factors that are not mentioned in the Case Company information above, but obtained from a reliable source (please remember to cite), or well-known.

(b) For the risks you analyse in (a), analyse the most significant risk of material misstatement (RMM) for each process (i.e. only one RMM for each process).

(c) For each RMM evaluated in (b), assess one (1) key control that the Group should implement, and how the audit team would test the control.

Since auditors usually bypass tests of controls when auditing financial management processes except for auditing cash, if your RMM in (b) for financial management process is related to non-cash items (e.g. debt, investment, equity), you don't need to explain how to test the related control for financial management process.

(d) For each of the RMM evaluated in (b), discuss one (1) key substantive procedure(s) the audit team should perform, and the audit exception(s) that the team would identify through these substantive procedures.