You are planning a meeting with a new Audit client, Oscars Limited in respect of their audit coming up shortly. The company recently converted to a company from a partnership and has its year end as 30 June 2020. There have been no previous audits due to the conversion. The companys bankers have requested that an audit is undertaken on the financial statements for the year ending 30 June 2020. A request has been made for an increase in banks overdraft facility by the Company in order to meet higher inventory levels due to increasing demand for its products.

The company buys materials directly to manufacture beds and inventory at the end of the year comprises of raw materials, work-in -progress and finished goods. The Company intends to carry out a full audit on 30 June 2020 as it does not undertake continuous inventory audit. Finished products and work-in-progress are valued using standard costing system.

Required:

a) An Auditor can obtain sound knowledge of a business during the planning stage. Enumerate the objectives of the planning stage in an Audit? (10 Marks)

b) What audit risks can you identify at Oscars limited and how would you address those risks? (10 Marks)