You are an audit supervisor of Chania & Co Associates and are planning the audit of your client, Chadema Producers Ltd which manufactures cleaning products. Its year end was 31 July 2019 and the draft profit before tax is sh.336 million. You are supervising a large audit team for the first time and will have specific responsibility for supervising and reviewing the work of the audit assistants in your team.

Chadema Producers Ltd purchases most of its raw materials from suppliers in Africa and these goods are shipped directly to the company's warehouse and the goods are usually in transit for up to three weeks. The company has incurred sh.13 million of expenditure on developing a new range of cleaning products which are due to be launched into the market place in November 2019. In September 2018, Chadema Producers Ltd also invested sh.09 million in a complex piece of plant and machinery as part of the development process. The full amount has been capitalised and this cost includes the purchase price, installation costs and training costs.

This year, the bonus scheme for senior management and directors has been changed so that rather than focusing on profits, it is instead based on the value of year-end total assets. In previous years an allowance for receivables, made up of specific balances, which equalled almost 1% of trade receivables was maintained. However, the finance director feels that this is excessive and unnecessary and has therefore not included it for 2019 and has credited the opening balance to the profit or loss account.

A new general ledger system was introduced in May 2019; the finance director has stated that the data was transferred and the old and new systems were run in parallel until the end of August 2019. As a result of the additional workload on the finance team, a number of control account reconciliations were not completed as at 31 July 2019, including the bank reconciliation. The finance director is comfortable with this as these reconciliations were completed successfully for both June and August 2019. In addition, the year-end close down of the purchase ledger was undertaken on 8 August 2019.

Required:

Describe SIX audit risks, and explain the auditor's response to each risk, in planning the audit of Chadema Producers Ltd.