You have recently joined the Accountancy firm in Gold Coast, Queensland. On June 2014, Gold Cost Paradise Pty Ltd, a family owned local company involved in catering holiday and leisure activities, has approached your Accountancy firm to carry out the audit for financial year ending 31 December 2014.Gold Cost Paradise offers holiday and leisure activities for visitors through its number of business outlets. In addition five star hotel, its other operations include boating, surfing and diving activities. Rod and Gina Wood are majority shareholders of Wood Group which controls Gold Coat Paradise. Gina is the Chief Financial Officer (CFO) of Gold Coat Paradise as well as director of both companies and Rod is the chairman of the board of directors of both Gold Cost Paradise and Wood Group. As an unlisted company, Gold Coast Paradise was not required under the Corporation Act to get its financial reports audited in the past. However, a new private equity investor group, Civic Venture, has just acquired 30 percent share of Gold Coat Paradise. The Civic Venture and the bank which has provided Civic Venture part of funds have requested an audit of the company's 2014 financial reports.Gold Cost Paradise employs full-time staff, part-time staff and casual staff. While part-time and casual staffs are used during peak periods, the business also employs 20 full-time staff in administration, accounting, catering, cleaning and hotel/ restaurant duties. Rod and Gina have a fairly relaxed management style. They trust their employees to work hard for the company and reward them well in return. The accounts staffs, in particular, are very loyal to the company. Rod told the audit partner that some accounts staff enjoy their jobs so much that they have never taken any annual leave, and hardly any employee ever take sick leave.The accounts department currently consists of three employees. Senior accounts manager, Josh Dunn who reports directly to the CFO, Gina Wood. Josh has started her transition to retirement and hopes to fully retire within three years. He delegates most of the work to the two accounts staff, John and Katherine. Josh claims that he has to do this because he is very busy developing a policy and procedures manual for the accounting department. This delegated work includes opening mail, processing payments and receipts, banking funds received, performing reconciliations, posting journals and performing the payroll function. Katherine is a recent CPA graduate. John is part-time and work only three days a week. He is responsible for posting all journal entries into the accounting system and the payroll function. Katherine does the balance of the work, but they often help each other out in busy periods.Queensland Environment Ministry has recently investigated the effects of global warming on the Great Barrier Reef. Its report reveals that climate change is likely to cause increasing damage to the coral reefs and devastating tropical storms over the next 10 years.Assignment taskThe audit partner asks you to commission the report. Your report should be critical but at the same time presented in easy-to-read and understand format. The report should address the followings in critical and considered manner:· Examine the background information in relation to the types of risk that you would consider when determining preliminary materiality for the 2014 audit of Gold Coast Paradise.Identify the factors that would impact on the risk of material misstatement and explain the effect of those factors on planning materiality and risk