with CPCI management and find out that it is working on re-form ulating both products, which should be ready in 201T. CPCI is offering large rebates to retailers in order to encourage sales of its older products. The two \"dirty\" products currently make up about 2% of CPCI's current inventory of $45 million. 7". William Kirk was hired recently as the Chief Operating Officer to provide closer oversight of the company. Due to all the new products and expansions, Cleo does not have time to spend to oniIoring the day-day operations. Kirk is attempting to bring in a greater emphasis on controls around financial reporting and monitoring (as recom mended by your firm in the past). Kirk started in June and one of the first things he did was to replace the CFO (the previous CFO was not very organized and tended to delay handling problems). He also implemented a new bonus plan based upon sales growth and profitability targets. He told you he thinks it is working out really well and sales are growing. However, he has not had a chance to implement all his plans such as hiring additional accounting staff and performing a formal assessment of the quality of internal controls. 8. In early 2016, CPCI launched two new collections, Ultimate Moisture and Moisture lGloss. These two products put an extensive strain on the company's cash ow. CPCI had spent $15 million in product development and $11] million on advertising. However, sales were much lower than predicted. Management had predicted 216 sales to be between $9 million to $10 million but, as of October 21116, sales were only $1 million. When you inquired about the low sales, the new CFO explained that the buyer had purchased inappropriate raw m aterials. This was not discovered during the inspection process when the materials were received. As a result, the finished product did not meet quality standards and was destroyed and the new collections arrived in stores much later than planned. The CFO stated that the sales people are working really hard at trying to get product dem and back on track by year-end and are negotiating new contracts with their customers. Required: (a) Based upon the above description, provide three key business risk factors that could increase the risk of material misstatement in GP lCI's financial statem ents. Explain which account(s) each of these risk factors could affect and the type of misstatem ent(s) that the risk might cause. Ensure to include in this discussion the most relevant assertions and the potential misstatement for the account. Use the table below and on the next page to complete your answer. (9 m arks) Identify and describe key business risk Account, most relevant assertion(s) 1 mark Potential Misstatement 2 marks