You are the auditor of Sanders Castillo Ltd, a distributor of griddles and grills. Using the companys financial report, its budget for the year under review and industry benchmarks, as well as your understanding of the entity, you have compiled the following information: Sanders Castillo operates in a low gross margin environment, meaning that large volumes are required to cover overhead costs and generate profits. It also means that overheads need to be kept under control to ensure that a net profit results from its operations. Financial gearing also plays a role in keeping interest costs down and maintaining a margin for solvency during economic downturns. Sanders Castillo did not reach industry benchmarks with regard to profitability in the previous year, and budgeted to better this in the current year. Sanders Castillos intended strategy was to keep its costs down in relation to sales, while allowing its gross profit ratio to drop, and plan to generate a large volume of sales. The company also planned to improve its working capital management by reducing levels of inventory and accounts receivable. It budgeted for a drop in gearing levels, thus indicating that it expected to produce a healthy cash flow to enable it to do so.

Ratio	Actual	Budgeted	Prior Year	Industry
Current ratio	2.02	1.60	1.55	1.80
Quick asset ratio	0.95	0.87	0.93	1.20
Times interest earned ratio	7.20	7.70	7.50	6.85
Debt to equity ratio	0.66	0.44	0.55	0.50
Days in inventory	43.20	32.40	34.30	33.30
Days in receivables	53.20	49.50	51.20	49.20
Gross profit ratio %	8.90	9.40	9.50	9.10
Admin. expenses/Sales %	1.15	1.80	1.87	2.31
Marketing expenses/Sales %	3.31	2.21	2.21	2.55

Required:

1. List the two ratios from the table above that the auditor would be most interested in when planning the audit of Sanders Castillo. Explain why you chose these ratios for each of them.
2. For each ratio you listed in part (a) indicate what general ledger account is primarily affected.
3. For each ratio you listed in part (a) indicate what assertion is most at risk. Explain why you believe this assertion is at risk for each of them.