You have recently been appointed as the partner for the $2011$ fin ancial year audit of NIWA $($Pty$)$ Ltd$,$

a new client for your firm. NiWA's financial year end is $30$ september. As a result of a difference in

opinion, the previous auditors decided to resign as auditors.

You obtained the following information from your recent planning meeting with the finan cial manager

of the company:

NIWA $($Pty$)$ Ltd is a manufacturer of a specific homeopathic eardrop that can only be sold to

homeopaths. NIWA $($Pty$)$ Ltd has standing contracts with most of the registered homeopaths in South

Africa. The homeopathic eardrops are manufactured with machines specifically designed for this

purpose and can only be serviced by the technicians of the manufacturer in Hungary. These eardrops

were patented in South Africa during $1995.$

NIWA $($Pty$)$ Ltd sells their homeopathic eardrops on normal credit terms to all registered homeopaths.

The only exclusion is sales to the Heal th Forum that is supplied on a con signment basis.

The management director of NIWA $($Pty$)$ Ltd$,$ Mr St eph Kotze was appointed on $1$ lanuary $2008$ after

the retirement of the previous management director. St ep h worked as a purchase manager from $1995$

to $2000$ at a homeopathic company. From $2001$ to $2007$ he coached the Proteas, the South African

Senior Cricket team.

You received a copy of the monthly management accounts to date during the planning meeting. The

audit senior has subsequently wouched the completeness, accu racy and reliability of the information

in the management accounts and has come to the conclusion that you can rely on these accounts.

Based on these management accounts, the audit senior compiled the following analytics:

You have performed preliminary tests of controls on the sales and receivables cycle and have come to

the conclusion that you can rely on the internal controls.

The client has informed you that the financial statements are required by $15$ November $2011$ as the

companys borrowing facility is reviewed on an annual basis and that the bank requires the audited

financial statements for this purpose.

REQUIRED:

Describe which matters you will consider in the development of your overall audit plan for the year

ended $30$ Sep tember $2011.$ Your answer should amongst ot hers include audit risks affecting the audit

as well as an evaluation of the planning materiality.