Consider each of the following independent situations:

a)       You are the auditor for Office Supplies Pty Ltd, a retailer of office equipment and supplies. While testing controls over payments of creditors you noted that many payments were made 180 days after the due date indicating that the client may have cash flow problems. You are now testing the creditors balance in order to form an opinion on that balance for the year-end audit report.

b)      As part of the year-end audit of Beige Ltd you are reviewing the company’s aged debtors balance. As a result of that review you note that 15% of debtors were due over 180 days ago. The company has a policy of maintaining a provision for doubtful debts at 2% of debtors. Debtors are a material item in the financial statements.

Required:

For each situation identify the financial statement assertion(s) about the balances under consideration that may be at risk. State why they are at risk and determine the audit procedures that can be used to gather sufficient appropriate evidence about these assertions.

Write your answer in answer booklet, using the following table format.

Client	Financial statement Assertions	Reason   the assertion may be at risk	Audit procedures
Office Supplies Pty Ltd
Beige Ltd

Answer rating: 100% (QA)

Answer Office SuppliesCreditors are financial statement assertions at risk The risk is caused as the... View the full answer