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Tutorial question Shades Ltd You are planning the audit of Shades Lid for the year ending 30 June 20%9 . The principal activities of the

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Tutorial question Shades Ltd You are planning the audit of Shades Lid for the year ending 30 June 20%9 . The principal activities of the company are the manufacture and distribution of a range of window blind systems and of the component parts for window blinds . Approximately 50 % of revenue generated from overseas customers During your preparation for the planning meeting with the finance director , the following matters have been highlighted as significant Operating results The company has had a successful year to date with revenue , gross and operating margins up on the previous 10 months to 10 months to Year to 30 April 20x9 30 April 20x8 30 June 20X8 E '000 E '000 E '000 Revenue 22,65 19,59 22,557 Cost of sales 13,367 12,472 14,313 Gross profit ,289 7,125 8,244 Operating expenses 4,531 4,115 1,732 Operating profi 4,758 3,010 3,512 Gross profit margin 41 % 36 % 37 % Operating profit margin 21 9 15 % 16 9 Inventories at 30 April 20%9 were 64.3 million compared with $3.6 million at 30 April 20XS and 63.4 million at 30 June 20%S New computer system During the year the company replaced its accounting software with a fully integrated standard package modified by the supplier to the company's requirements. Incentive scheme During the year the company introduced an incentive scheme under which the executive directors are entitled to a bonus based on pre-tax profits. The bonus will be paid thirty days after the audited accounts are available Requirement In respect of the above , identify and explain the potential audit risks and indicate the matters you would discuss with the finance director at your planning meeting

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