(a) Identify the key account balance at risk because of the sales team remuneration at Shady Oaks. Also identify and explain the key assertion at risk.
(b) Identify the key account balance and key assertion being tested with the substantive procedure. Given the bonus structure in place for the sales team, justify your answer.

Chan & Partners Chartered Accountants is a successful mid-tier accounting firm with a large range of clients across Australia. During the 2017 year, Chan & Partners gained a new client, Medical Services Holdings Group (MSHG), which owns 100 per cent of the following entities:

• Shady Oaks Hospital, a private hospital group

• Gardens Nursing Home Pty Ltd, a private nursing home

• Total Cancer Specialists Limited (TCSL), a private oncology clinic that specialises in the treatment of cancer.

Year-end for all MSHG entities is 30 June.

During the 2017 financial year, Shady Oaks released its own range of medical supplies such as bandages and first aid kits, which are sold via direct marketing by a sales team employed by the hospital.

The sales team are remunerated via a base salary and a bonus component which is based upon the dollar value of sales they generate. You recognise that their main motivation is to maximise their bonuses. You select a sample of payments received by the hospital post year-end and trace back to the general ledger and customer account balance.

In addition, you are reviewing the results of a number of tests in relation to accounts payable at Gardens Nursing Home, as follows.

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Test 1 2 Result A number of suppliers were selected from the list of trade creditors at year-end and balances traced to supplier invoices and goods received notes to ensure goods were received prior to the year-end. For two creditors out of 15 tested the balance was only marginally overstated. Selected a number of suppliers' invoices and checked that the pricing and discount terms have been reviewed and authorised by the purchase manager. Three out of 20 invoices tested had not been authorised and incorrect discounts were recorded for these invoices. A follow-up of the three samples with deviations did not highlight a pattern or specific reason for the errors. Conclusion Accepted as no material errors located. Accepted as the errors in discounts claimed were immaterial.