You are the audit manager of Star & Co and are currently planning the audit of an existing client, Advance Pharma (Advance), whose year-end was 30 June 2020. Advance is a pharmaceutical company, which manufactures and supplies a wide range of medical supplies. The draft financial statements show revenue of $35 million and profit before tax of $6 million. You attended the planning meeting with audit engagement partner and finance director last week and the minutes from the meeting are shown below.

Minutes of planning meeting for Advance During the year Advance has spent $18 million on developing several new products. These projects are at different stages of development and the draft financial statements show the full amount of $18 million within intangible assets. In order to increase internal controls, a new accounting general ledger has been introduced at the beginning of the year with the old and new system run in parallel for a period of two months. The finance director has informed that since the year end there has been an increased number of sales returns and over $05 million of goods sold in 2019 were returned. As the level of production has increased, the company has expanded the number of warehouses it uses to store inventory. It now utilises 5 warehouses; 3 are owned by Advance and 2 are rented from third parties. There will be inventory counts taking place at all 5 of these sites at the year end. As a result of the increase in revenue, Advance has recently recruited a new credit controller to chase outstanding receivables. The finance director thinks it is not necessary to continue to maintain an allowance for receivables and so has released the opening allowance of $15 million. As in previous years, the management of Advance is due to be paid a significant annual bonus based on the value of year-end total assets.

Required Using the information provided, describe Five audit risks and explain the auditors response to each risk in planning the audit of Advance.