You are an Audit Senior currently planning the 30 June 20X8 audit of Almond Limited, an Australian-owned company that produces and exports Almond milk to China. The milk is subjected to ultra-high temperature (UHT) pasteurization processing before being packaged in cartons so that it can last six months at ambient temperatures if unopened. At a recent planning meeting with Almond Limited's senior staff, you obtained the following overview of this year's operations: Tight checks by Australian custom officials have delayed several shipments of Almond milk. These delays have angered Chinese customers who are threatening to deduct 20% from the amounts owing as compensation for lost production time. Almond Limited's main competitor, Tasty Milk has taken advantage of this and started supplying to the Chinese market from its New Zealand branch for quicker deliveries and at prices lower than those offered by Almond Limited. One of Almond Limited's customers, Super Dairy Limited (SDL), is claiming that the latest batch of milk it received was found to have very high levels of carrageenan, a seaweed derivative commonly used as a stabilizer in beverages. The presence of carrageenan has been widely associated with gastrointestinal inflammation. SDL is refusing to pay its account, which is allegedly six months overdue. Almond Limited has claimed to have launched an investigation into the allegations, but as yet not been able to substantiate them. 60% of the suppliers from which Almond Limited sources it's almonds are owned by US firms, which demand payment in $US prior to the almonds being supplied. In January, Almond Limited upgraded its accounts payable system to a fully integrated package that automatically updates the general ledger when creditor entries are made. Some problems have been experienced with the creditors ledger, which is split into $US and $AUD amounts. In some cases, $US amounts have been recorded as $AUD, resulting in inaccurate creditor balances. Month-end rollovers have also proved problematic, with creditor balances being incorrectly reset to zero at the first of every month. This has required each creditor's history to be re-entered manually each month, a time-consuming process that is taking accounting staff away from their normal duties. During the period, the Australian dollar has remained steady against the Chinese Yuan, although it fell by about 3% against the US dollar. Debtors are invoiced in $US at the time of shipment, and payment is received in $US one month after the shipment is delivered. It takes around four weeks for the charter vessels to travel from Almond Limited's shipyard at Dockland Bay to China. A recent downturn in the Chinese economy is affecting forward orders, which have fallen by 15%. A team of internal auditors was hired 10 months ago by Almond Limited to improve on its existing internal control. The process of revamping the internal control has been dragging because the CEO has kept on declining the internal auditors' suggestions for improvement. The accountant of Almond Limited has been notorious for finding gaps in the legislations in order to make its clients' financial statements look presentable as desired by the clients themselves. In the past few years, Almond Limited has always been required by the Australian Tax Office to provide additional supporting information after the lodgement of its tax returns.

Required: Prepare a memorandum to the audit manager, outlining your risk assessment relating to Almond Limited. When making your risk assessment:

(a) Identify three (3) key account balances from the information provided that are subjected to an increase in audit risk. Briefly explain what factors increase the audit risk associated with the three (3) accounts identified. In your explanation, please mention the key assertion(s) at risk of material misstatement and the components of the audit risk model affected for each account identified.

(b) Identify how the audit plan will be affected and recommend specific audit procedures to address the risks associated with each account identified.