You are the audit senior working on the audit of Reef Building Supplies Limited (RBS), a large supplier of building materials, for the year ended 30 June 2020. While completing your risk assessment of RBS, you know that the company appears to have a significant debt recovery problem. The majority of RBS’s accounts receivable were outstanding for more than 60 days. RBS’s provision for doubtful debts is currently calculated at 1% of Accounts Receivable at month end. In the previous two financial years, RBS wrote off $760,000 and $1,050,00 worth of Accounts Receivable, respectively. In those years sales were $7,000,000 and $11,200,000, respectively. Required: Describe the substantive procedures you will carry out at year-end in order to obtain sufficient audit evidence regarding the assertions of valuation and existence in relation to Accounts Receivable
You are the audit senior working on the audit of Reef Building Supplies Limited (RBS), a large supplier of building materials, for the year ended 30 June 2020. While completing your risk assessment of RBS, you know that the company appears to have a significant debt recovery problem. The majority of RBS’s accounts receivable were outstanding for more than 60 days. RBS’s provision for doubtful debts is currently calculated at 1% of Accounts Receivable at month end. In the previous two financial years, RBS wrote off $760,000 and $1,050,00 worth of Accounts Receivable, respectively. In those years sales were $7,000,000 and $11,200,000, respectively. Required: Describe the substantive procedures you will carry out at year-end in order to obtain sufficient audit evidence regarding the assertions of valuation and existence in relation to Accounts Receivable
You are the audit senior working on the audit of Reef Building Supplies Limited (RBS), a large supplier of building materials, for the year ended 30 June 2020. While completing your risk assessment of RBS, you know that the company appears to have a significant debt recovery problem. The majority of RBS’s accounts receivable were outstanding for more than 60 days. RBS’s provision for doubtful debts is currently calculated at 1% of Accounts Receivable at month end. In the previous two financial years, RBS wrote off $760,000 and $1,050,00 worth of Accounts Receivable, respectively. In those years sales were $7,000,000 and $11,200,000, respectively. Required: Describe the substantive procedures you will carry out at year-end in order to obtain sufficient audit evidence regarding the assertions of valuation and existence in relation to Accounts Receivable
You are the audit senior working on the audit of Reef Building Supplies Limited (RBS), a large supplier of building materials, for the year ended 30 June 2020. While completing your risk assessment of RBS, you know that the company appears to have a significant debt recovery problem. The majority of RBS’s accounts receivable were outstanding for more than 60 days. RBS’s provision for doubtful debts is currently calculated at 1% of Accounts Receivable at month end. In the previous two financial years, RBS wrote off $760,000 and $1,050,00 worth of Accounts Receivable, respectively. In those years sales were $7,000,000 and $11,200,000, respectively.
Required:
Describe the substantive procedures you will carry out at year-end in order to obtain sufficient audit evidence regarding the assertions of valuation and existence in relation to Accounts Receivable
Definition Definition Money that the business will be receiving from its clients who have utilized the credit provided to buy its goods and services. The credit period typically lasts for a short term, lasting from a few days, a few months, to a year.
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