Reference no: EM132743671

Question: Diacos ltd is a large well established computer parts manufacturer that sells parts of computer stores. changing technology makes the industry very competitive and diacos has made small profits for the last couple of years. its bank loan depends on it continuing to earn profit because of competitive pressure, Diacos recently located the manufacture of some of its computer parts from perth , in Australia, and hongkong to southern china. this has reduced the manufacturing cost, but occasional quality problems have resulted in some lost orders.
sale staff have previously been paid a fixed salary based on the number of years they have been with the company. however, a new commission scheme is being introduced this year by which staff will be paid lower fixed salary but will receive a 4% commission if their individual sales targets met or exceed. Diacos plans to upgrade its general ledger reporting a new software package. the conversion is planned for just before year end so that it will be ready next year. the new computer system will provide detailed information on sales, gross margins and inventory levels.

Required: What factors will affect the planning of the audit for Daicos and why?