Reference no: EM132780855

Capital Cars Inc. (CCI) is a private company that owns five auto parts stores across the country. CCI has gone from two auto parts stores to five stores in the last three years, and it plans continued growth. Rolf and Rowen Power own the majority of the shares in CCI. Rolf is the CEO and Chairman of the board of directors of CCI. Rowen is the CFO and a director of CCI. Other shareholders are friends and family who helped the Powers get started. Rolf started the company with one store after working in an auto parts store. To date, he has funded growth from an inheritance and investments from a few friends. Rolf and Rowen are thinking about expanding by opening three to five additional stores in the next few years and have managed to attract the attention of an angel investor who has just acquired a 20% share of CCI. The company is yet to have an annual audit. The audit has been requested by the company's bank because of anticipated bank loans. In June of this year, 2021, Rolf approached your accounting firm, Weekes-Marshall & Co., to conduct an annual audit of CCI for the year ended December 31, 2021. CCI employs 30 full-time staff. These workers are employed in store management, sales, parts delivery, and accounting. About 40% of CCI's business is retail walk-in business, and the other 60% is regular customers where CCI delivers parts to their locations and bills these customers on account. During peak periods, CCI also uses seasonal part-time workers. Rolf is focused on growing revenues. Rowen trusts the company's workers to work hard for the company and he feels they should be rewarded well. The accounting staff, in particular, is very loyal to the company. Rolf tells you that accounting staff enjoy their jobs so much they have never taken any annual vacations, and hardly any workers ever take sick leave. There are two people currently employed as accounting staff, the most senior of whom is Dale Best. Dale reports directly to Rowen. He is in his late fifties and hopes to retire in two or three years. Dale keeps a close watch on accounting and does many activities himself, including opening mail, cash receipts and vendor payments, depositing funds received, performing reconciliations, posting journals, and performing the payroll function. His second employee, Sarah South, is a recent college graduate who just passed her professional accounting exams with the ACCA. Sarah is responsible for the payroll functions and posting all journal entries to the accounting system. Dale and Sarah often help each other out during busy periods.

Problem 1: What qualitative factors in the background information would you consider when determining planning materiality for the 2021 audit of CCI?