Part C Part C.1 Background information Gifts Ltd(Gifts) operates 30 specialty gift stores. The company’s year-endis 30 June 2018. The audit manager and partner recently attended aplanning meeting with the finance director and have provided youwith the planning notes below. You are the audit senior, and thisis your first year on this audit. The audit manager has asked youto undertake some research to gain an understanding of Gifts, sothat you are able to assist in the planning process. He has thenasked that you identify relevant audit risks from the notes belowand also consider how the team should respond to these risks. Giftsspent $2.1 million in refurbishing all of its stores and extendingtheir central warehouse. In order to finance this refurbishment,Gifts borrowed $2 million from the bank. This is due to be repaidover five years. The company will be performing a year-endinventory count at the central warehouse, as well as at all 30stores, on 30 June 2018. Inventory is valued at selling price lessan average profit margin, as the finance director believes thatthis is a close approximation of cost. Prior to the 2018 financialyear, each store maintained its own financial records and submittedreturns monthly to head office. During the 2018 financial year allaccounting records were centralised within head office. Therefore,at the beginning of the 2018 financial year, each store’s openingbalances were transferred into head office’s accounting records.The increased workload at head office has led to some changes inthe finance department and in May 2018 the financial controllerleft. Her replacement will start in late June 2018. REQUIRED: a)List two (2) sources of information that would be of use in gainingan understanding of Gifts, and for each source describe whatinformation you would expect to obtain. b) Using thebackground information provided above, identify six (6) audit risksand explain the auditor’s response to each risk in planning theaudit of Gifts. Part C.2 The finance director of Giftsis considering establishing an internal audit department and isunsure what factors he should consider when making his decision.REQUIRED: Bearing in mind the differences and similarities betweenthe roles of an internal auditor compared to an external auditor,outline four (4) factors the finance director should considerbefore establishing an internal audit department.