You are an audit supervisor of Calvin & Partners (Calvin) and you are planning the audit of Heng Berhad (HB), a listed company, for the year ending 31 March 2020. The company manufactures laptop parts and total assets are RM79.3 million and expected profit before tax is RM33.6 million. HB supplies its products via wholesalers as well as through its own website. The website was updated throughout the year at a cost of RM1.1 million. Additionally, the company entered a transaction in February to purchase a new warehouse which will cost RM3.2 million. HB's legal advisers are working to ensure that the legal process will be completed by the year end. The company issued RM5 million of irredeemable preference shares to finance the warehouse purchase. During the year, the finance director has increased the useful economic lives of fixtures and fittings from three to four years as he felt this was a more appropriate period. The finance director has informed the engagement partner that a revised credit period has been agreed with one of its wholesale customers, as they have been experiencing difficulties with repaying the balance of RM1.2 million owing to HB. In January 2020, HB introduced a new bonus based on sales targets for its sales staff. This has resulted in a significant number of new wholesale customer accounts being opened by sales staff. The new customers have been given favourable credit terms as an introductory offer, provided goods are purchased within a two-month period. As a result, revenue has increased by 5% on the prior year. The company has launched several new products this year and all but one of these new launches have been successful. Feedback on product Luge, launched four months ago, has been mixed, and the company has just received notice from one of their customers, Peng Berhad, of intended legal action. They are alleging the product sold to them was faulty, resulting in a significant loss of information and an ongoing detrimental impact on profits. As a precaution, sales of the Leisure product have been halted and a product recall has been initiated for any Leisure products sold in the last four months. The finance director is keen to announce the company's financial results to the stock market earlier than last year and to facilitate this, he has asked if the audit could be completed in a shorter timescale. In addition, the company is intending to propose a final dividend once the financial statements are finalised. HB's finance director has informed the audit engagement partner that one of the company's non-executive directors (NEDs) has just resigned, and he has enquired if the partners at Calvin can help HB in recruiting a new NED. Specifically, he has requested the engagement quality control reviewer, who was untillast year the audit engagement partner on HB, assist the company in this recruitment. Calvin also provides taxation services for HB in the form of tax return preparation along with some tax planning advice. The finance director has recommended to the audit committee of HB that this year's audit fee should be based on the company's profit before tax. At today's date, 20% of last year's audit fee is still outstanding and was due to be paid three months ago. (a) ISA 300 Planning an Audit of Financial Statements provides guidance to auditors. Planning an audit involves establishing the overall audit strategy for the engagement and developing an audit plan. Adequate planning benefits the audit of financial statements in several ways. Required: Explain the importance of audit planning. (5 marks) (b) Illustrate audit risk and the components of audit risk. (4 marks) (c) Identify any EIGHT (8) audit risks, and explain the auditor's response to each risk, in planning the audit of HB. (16 marks) [Total : 25 Marks)