You will earn free points for this either way.  I just want…

Questions

Reаd the scenаriо belоw аnd answer the audit planning questiоns in this document below.  Zesty Joy Popcorn Inc. . (ZJP) is a publicly traded company in the popcorn industry founded by Jasmin Shark in 2016. Jasmin has a philosophy that everyone deserves to be able to have movie theatre popcorn in their own home whenever they desire.  The company operates in Canada and delivers movie theatre popcorn in major cities across the country. The audit engagement letter has been signed and the audit planning process is underway. ZJP is located in Edmonton, Alberta. The company imports various popcorn from international locations and applies their secret popping and seasoning in order to sell. This is done in a facility, which is owned by a third party, Perfect Poppers (PP). Once the process is complete, the popcorn is packaged and sold to customers so they can pop it in their own microwave. The company is strictly an on-line company and customers will order from the ZJP website. ZJP has a warehouse to store all of the packaged product, as they await orders and deliveries.  The financial statements of ZJP are prepared in accordance with International Financial Reporting Standards (IFRS). The company uses a perpetual inventory system and reports on a fiscal year basis annually. Management has a good reputation, however there have been significant changes in ZJP's management during the year. The CFO is looking to retire this May. The Controller is new to the company, as the previous Controller, Beth Wilkins, went on maternity leave and has decided not to return. ZJP's year end is June 30th. Jasmin, the President and CEO, has been actively searching for a replacement for the CFO. The new Controller will have been with the company for three months prior to year end. Jasmin confides in you that ZJP's financial performance on the books does not seem that great. She is not sure whether it is due to an issue with the allowance for doubtful accounts issue or perhaps funds are missing, or if the company has really been doing that poorly. Jasmin feels that sales are up as they are moving through inventory quite quickly and she needed to hire additional delivery drivers. Gross profit and net income appear to be down though.  The pandemic was a great time for ZJP's business as many people ordered popcorn to be delivered to their homes in the early months of the pandemic. There was also less competition as many people were making their own popcorn at home, rather than going to theatres. Jasmin employs several delivery drives and due to the increased demand for popcorn over the past few years, none of them have taken vacation.  During the year, ZJP installed a new scale system to weigh corn prior to packaging.  The amount to be paid to PP is then calculated and recorded immediately. The system automatically records the inventory and issues an electronic payment for the amount calculated by the scale. PP has been complaining that they are not paid the correct amount, but ZJP is proud to be a technologically advanced popcorn distributor in the region. The new scale system has allowed the company to cut some jobs this year and be more cost efficient. Business has been strained recently though due to supply chain issues to obtain international popcorn.  Since the company imports corn from various countries, they usually pay for the corn in U.S dollars. Due to changing interest rates in Canada, the Canadian dollar against the U.S. Dollar has weakened and it is costing nearly 30% more to purchase.  Below are some excerpts of financial information (presented in millions): Account 2025 2024 Sales Revenue $5,000 $6,000 Gross Profit $2,000 $2,400 Operating Expenses $1,500 $1,800 Net Income $500 $600 Total Assets $4,000 $4,500 Total Liabilities $1,500 $1,800 Equity $2,500 $2,700 Current Ratio 0.75 2.0 Inventory Turnover Ratio 1.2 1.5 Debt-to-Equity Ratio 0.6 0.7 You are a newly designated CPA work for Billar & Co. and have been promoted to Audit Senior on the ZJP audit engagement. It is now early May 2025 and you are reviewing information gathered to date in preparation for the year-end audit. This will be the first time that ZJP will be audited.  Required: As an auditor, what is your assessment of inherent risk? List three case facts that support your assessment of Low, Moderate or High). (7 marks)  As an auditor, what is your assessment of control risk? List two case facts that support your assessment of Low, Moderate or High). (5 marks)  As an auditor, what is your assessment of audit risk? Support your assessment of Low, Moderate or High. (2 marks)  Based on your conclusions above, explain the type of audit strategy you will take. (2 marks)  Discuss two major fraud risk factors that are present in the company, and how plan to address it during your audit. (4 marks)  Analytical procedures – Discuss three specific account balances/areas you would want to focus on in your audit and explain why (6 marks)  What base would you use for materiality and why? (2 marks)