You are an audit and assurance services senior at Hailey and associates and have noted the following independence issues in relation to the audit of Enova Ltd.

questions

Part A.

The accounting system at Enova Ltd did not operate effectively during the first year of operations. Consequently it was decided to adopt a new accounts based on estimates.

Part B.

As a result of cost constraints, the directors of Enova Ltd did not implement effective internal controls for debt collection. The debtors turnover is 3.2 times.

Part C.

Due to increased competitive pressures, Enova Ltd has recently moved the manufacture of some of its clothing lines out of Melbourne into regional areas, while Enova Ltd saves around 20% in costs, the manufacturing process takes longer and on several occasions late delivery has resulted in lost sales.

Required:

For the above scenario explain the impact of this issue on your assessment of audit risk, the materiality level and the audit strategy that would be adopted