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Dear Tutor,
regarding the risk related to 1,6 million refurbishing costs would my response below be acceptable:
Obtain a schedule of refurbishing costs and the supporting invoices and ensure that costs that meet the criteria for capitalising were capitalised and those that should be expensed were expensed according to IAS 16.
First state the audit risk (you are asked to do that). Here it is that some costs are capitalised when they should be expensed (and the other way round).
Then state how you would respond. Here your answer is correct.
The answer to this question can be usefully set out using two columns: one for risks and the other for the matching responses.
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