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
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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
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