You are a third$-$year Audit Trainee at Nexus Audit Firm $($Nexus$),$ and you are currently

part of the audit team of Techno Genius $($Pty$)$ Ltd $($Techno$).$

Background information on Techno

Techno manufactures high$-$end laptops and operates in South Africa with a central

warehouse in Durban. The entity has a $31$ December financial year$-$end.

Techno was established in March $2001,$ is privately owned by Ben Knowles, and is

VAT$-$registered with SARS. Techno complies with the International Financial

Reporting Standards $($IFRS$).$

Revenue

Sales are made on credit to customers. You were assigned to audit Technos revenue

section, and the Audit Manager, Mike Fetch, requested that you formulate substantive

procedures. Techno maintains a price list of all the manufactured laptops and updates

the price list every month.

During the audit, you received an extract of a sales tax invoice as follows:

SALES TAX INVOICE

VAT REGISTRATION NUMBER $548964754$

Techno Genius $($Pty$)$ Ltd;

Unit $32-24$ Valley Street, Johannesburg

Phone: $030-556-0545$

PURCHASED BYE

Wendy Maciedd

Hillsville $($Pe$/)$ Ltd

$451$ Sunrise Valley Cape Town, Sood

Phone: $021-465-3548$

COMMENTS OR SPECIAL INSTRUCTIONS:

Payment is due in $30$ days from invoice date

Shipping date will be on the $11/15/2022.$

INVOICE # $25347$

DATE: $11/12/2022$

SHIP TO:

Wendy Macleod

Hillsville $($Pty$)$ Ltd

$451$ Sunrise Valley

Cape Town, $8000$

Phone: $022-465-3548$

QUANTITY

$5$

$10$

DESCRIPTION

Cell Laptops $1515$ inch

Cell Laptops $|334$ inch

UNIT PRICE $($EXCLUDING VAT$)$

R$15999-99$

R$10000\mathrm{.}00$

Subtotal

Discaunt $(5\%)$

VAT $(25\%)$

TOTAL DUE

TOTAL

R$79999-95$

R$100000\mathrm{.}00$

R$179999\mathrm{.}95$

$($Rg $000\mathrm{.}00)$

R$25649-99$

R$396649-95$

Trade receivables

Techno has both local and foreign trade debtors. Customers must fill out registration

forms and complete a credit application when purchasing on credit. Once the credit

department successfully checks the potential customers credit history, the potential

customers credit application is approved. After that, specific credit limits and terms

are determined for each customer. Following Techno's credit policy, customers must

settle amounts due within $30$ days. If the payment isn't received within $60$ days, the

customer will be referred to debt collectors, and interest will be charged at $8\%$ per

annum on these outstanding balances.

You obtained the following debtors age analysis from Technos Financial Manager,

Tim Lee, at year$-$end:

Total closing

balance

Current Over $30$

days

Over $60$

days

Over $90$

days

Over $120$

days

R $4350000$ R$2175000$ R$652500$ R$435000$ R$348000$ R$739500$

Percentage

of total

debtors

$50\%15\%10\%8\%17\%$

The allowance for credit losses $($previously called bad debts allowance$)$ is raised

against a customer if the account is to be settled within $90$ days. Outstanding balances

older than $120$ days include debtors that have been liquidated.

QUESTION

With reference to the trade receivables information, formulate the substantive

audit procedures you would perform to obtain sufficient and appropriate audit

evidence regarding the accuracy, valuation, and allocation of trade

receivables for the year ending $31$ December $2022.$

Structure the answer using the below headings:

Trade receivables substantive procedures.

$(15$ marks$)$

Allowance for credit losses substantive procedures $($previously called bad debts allowances$).$

$(10$ marks$)$

Where applicable, always state the section$/$regulation in the relevant

International Standard of Auditing $/$ Companies Act $/$ Auditing Profession

Act $/$ King Code IV$,$ then apply the specific section$/$regulation identified to the question$/$information$/$scenario$.$