Your audit firm, Beauties Consult, is going to audit for the first time the financial statements of Black Gold Co. Ltd. for the year ended 31 December, 2017. Black Gold Co. Ltd. operates a chain of fuel filling stations in the Greater Accra, Ashanti and Western Regions of Ghana. Customers pay cash for the main products premium, diesel and kerosene.

According to its directors, the company has had a challenging year, and is renegotiating its bank overdraft facility with its bankers. The Statement of Profit or Loss for the year ended 31 December, 2016 is shown below together with the draft Statement of Profit or Loss for the year ended 31 December, 2017.

Black Gold Co. Ltd: Statement of Profit or Loss Account for the year ended

Revenue

Cost of Sales

Gross Profit

Operating Expenses: Administration

Selling and Distribution Interest

Profit before Tax

Required:

31/12/ 2017 GH000 10,410 (4,752) 5,658

(1,334) (846) (120)

3,358

31/12/2016 GH000 9,528 (5,110)

4,418

(1,596) (920)

(118)

1,784

As head of the audit team, you are carrying out risk assessment at the planning stage. Perform analytical review of the draft statement of profit or loss to identify possible risk areas requiring further audit work and provide the necessary risk responses