Wayson Berhad, which manufactures At-home Antigen Rapid Test Kit, has a year-end of November 30, 2021. Mr. Kong is the audit supervisor at Zook Sports Ltd and Wayson Berhad’s year-end audit is about to begin.

The draft financial statement demonstrates RM5,200,000 for the profit before taxation and RM36,000,000 for the total assets. Mr. Kong is responsible for auditing accounts receivable, an important balancing act, and will adopt a positive receivables circularization as part of the audit approach.

In a planning meeting, Wayson Berhad’s CFO, Madam Kate informed the audit project partners that the company was closing one of its smaller production sites and, as a result, some staff would be made redundant. A provision for redundancy of RM220,000 is included in the draft financial statements.

Required:

(a) Outlines the steps Mr Kong would need to execute in undertaking a positive receivables circularisation for Wayson Berhad. (4 marks)

(b) Outline the substantive procedures, other than a receivables circularisation, Mr Kong would need to execute to verify each of the following assertions in relation to Wayson Berhad’s receivables: 

(1) Completeness

(2) Rights and obligations

(3) Accuracy, valuation and allocation

(c) Outline the substantive procedures Mr Kong would need to execute to confirm the redundancy provision at the year end. 

(d) If the issue remains unresolved, examine the issue and describe the impact on the audit report, if any.

Answer rating: 100% (QA)

The solution of the question is A Steps to take positive positive circularisation 1 Obtain permission from the finance director to make available circularization 2 Find a list of trade receivables at ... View the full answer