Answer the following questions with reference to Funtastic Limited.
i) Why would the shareholders of Funtastic Limited require that an independent external auditor, in this instance Grant Thornton, perform an annual audit?
ii) Discuss whether or not or how does the audit process that Funtastic Limited went through promotes common good and stewardship.
iii) Assume Funtastic Limited has tight key performance indicators (KPI) for sales. Executive management and sales staff are remunerated and their performance is evaluated based on revenue generated and net income made. Identify and discuss ethical issues that are likely to stem from KPIs in place and how they might affect the auditor’s plan.
iv) Perform ratio analysis and relevant comparisons as part of your planning analytical procedures to identify significant issues or results of the business that require detailed investigation and explanation. The analytical procedures should cover profitability, liquidity and solvency. It is totally up to you to determine the relevant ratios and calculations. Discuss the effect of your preliminary analytical review on your audit plan