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Question - You have recently been re-appointed as the auditor of Melvin Co. (a manufacturer of sports equipment). You have held a meeting with the client and have ascertained the following:
1) Melvin Co uses a third-party warehouse provider to store the manufactured ergometers and approximately one quarter of the other equipment.
2) Historically, Melvin Co. has sold to retailers and directly to consumers, via its Website. Retailer sales have fallen dramatically in the last two years.
3) Some of Melvin Co.'s retailing customers are struggling to pay their outstanding balances.
4) Melvin Co. is planning to list on the stock exchange next year.
Required - Using the information provided, identify and describe four audit risks and explain the -auditor's response to each risk in planning the audit of Melvin Co.
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