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Background The audit engagement team for Sunflower Company (Sunflower or the "Company") is in the planning stages of performing risk assessment procedures related to the investment account balance. The team has prepared a memorandum documenting its preliminary understanding of the investment account balance as of the close of Q3 (as of September 30, 20Y2) in order to plan its approach for the year-end audit (as of December 31, 20Y2). An excerpt of this risk assessment memorandum is presented in Handout 1. 1. Read Handout 1 and write about what you learned about Sunflower and its investments. 2. Now that you have a preliminary understanding of Sunflower's investment account balance, open Handout 2 The audit manager has informed you that the following risk of material misstatement related to the valuation assertion associated with the investments has been identified: Assumptions, inputs, or methods used to determine the fair value of the security are inappropriate on the basis of assumptions or observable or unobservable inputs in the marketplace and are significant to the valuation (Level 2 securities). [ROMM #1] In addition, the following risk of material misstatement related to the presentation and disclosure of investments has been identified: The Company's classification of securities is inconsistent with the fair value hierarchy (e.g., it classifies a security as Level 2 rather than Level 3). [ROMM #2] None of these risks were determined to be significant. Note that the above risks are the only ones that need to be addressed for this assignment. The audit manager has provided you with visualizations (created using visualization software) that present additional analytical information about Sunflower's investment portfolio. She has asked you to review the visualizations to determine what each shows and how the information might affect our risk assessment. She has also asked that, when determining the impact on our risk assessment, you specify whether the information obtained from the visualization assisted you or could assist you in (1) identifying a new risk of material misstatement, (2) assessing or reassessing the risk level of the risks of material misstatement already identified, (3) designing tailored audit procedures, or (4) providing fact-based evidence to support your current risk assessment. In addition, the audit manager has questions about certain visualizations (included in Handout 2). Use Handout 2 to jot down your responses.Sunflower Company - Handout 1 Read the following excerpt from the Investment Risk Assessment Memorandum of Sunflower Company. This memo was prepared by the audit engagement team just after the close of Q3 (as of September 30, 20Y2) in order to plan its approach for the year-end audit (as of December 31, 20Y2). Key: (Note that the current year and prior year are represented by 20Y2 and 20Y1, respectively.) Sunflower Company (the "Company") is a public entity with a December 31 fiscal year-end. The Company is an accelerated filer that issues annual and quarterly consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). We are engaged to perform an integrated audit of the Company's annual U.S. GAAP consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB). The Company has an investment portfolio that is 70 times materiality. The portfolio consists of 1) exchange-traded equity securities and U.S. treasuries that are classified as Level 1 in accordance with the ASC 820 fair value hierarchy and (2) mortgage-backed securities, asset- backed securities, and corporate debt securities that are classified as Level 2. The Company does not have any Level 3 securities. The classification of investment types as of September 30, 20Y2 (see Figure 1 below), is consistent with the classifications as of December 31, 20Yl (e.g., agency securities as of September 30, 20Y2, remained classified as agency securities as of December 31, 20Y1). In addition, the classification of investment types by level as of September 30, 20Y2 (see Figure 2 below), is consistent with the classifications as of December 31, 20Y1 (e.g., agency securities were classified as Level 2 as of September 30, 20Y2, and December 31, 20Y1). We plan to use a "control reliance" approach to address the risks of material misstatement and assertions related to the Company's investment account balance, including identifying and testing operating effectiveness of the controls that address the risks of material misstatement. The Company's investment professionals are very experienced and have the appropriate skills and capabilities to price and monitor the Company's investment activities. On the basis of interactions during our audit procedures, we believe the vice president of treasury and the risk manager are competent and have the relevant experience. Fiscal Year 20Y2 Audit Materiality (in millions) Materiality: $150 Performance Materiality: $105Visualization 6 Saw\"! MM\" by Fair Value All Securities This map shows the pomphical disttibution of the fair value of all securities in the Company's portfolio. What do these visualizations show? How might these observations affect our risk assessment? Why would it be important to know whether any securities are traded on a foreign exchange? What can we do to further investigate