QUESTION TWO (10 Marks) You are the audit manager currently undertaking the planning of the audit for the financial year ended 30 June 2019 of Fancy Fashion Wholesale Lid (FFWL), a large wholesaler of women's handbags. You have the following additional information: . FFWL is known for always having the latest and most fashionable products available. These products are purchased from both local and overseas suppliers. The company's market comprises large chain stores, established specialist handbag retailers and, more recently, 'up-market' accessory booths located in major shopping malls. From the beginning of March 2019, most local purchases, at the request of FFWL's suppliers, have been on a Cash on Delivery (COD) basis. It is now April 2019. You have performed preliminary analytical procedures using the 31 March 2019 management reports (ratios annualised in these instances) together with the audited figures for the previous two financial years (year end 30 June). Results of ratio analysis Year Current Quick ratio Accounts Year-end Inventory Sales ratio receivable. Accounts turnover returns as turnover receivable ratio a % of (days in as a % of sales accounts sales receivable) 2019 P.01 0.52 79 days 23% 3.3 times 2.9% 2018 1.13 0.61 61 days 18% 4.2 times 2.3% 2017 1.21 0.64 56 days 14% 4.8 times 1.6% Semester 2 2020 Final Examination Page 3 of 10 Asia Pacific College of Business and Law This examination paper is not permitted to be reproduced or disseminated. Results of simple comparisons Year Accounts Gross sales Inventory receivable $'000 $'000 $'000 2019 $14,452 $62,596 $16,622 2018 $13,342 $74,352 $12,480 $86,684 $11,638 2017 $12,268