You are an Audit Trainee and your very first audit is that of Y&G Retailers (Pty)...
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You are an Audit Trainee and your very first audit is that of Y&G Retailers (Pty) Ltd. During the audit you overheard the following conversation between the Audit Supervisor and Audit Partner: "What can be wrong with that!" asked the Audit Supervisor from the Audit Partner. "The Financial Manager (FM) told me himself that the balance outstanding owed by Pack and Pay (Pty) Ltd of R3 million is recoverable!" Pack and Pay (Pty) Ltd is one of Y&G Retailers (Pty) Ltd's biggest customers. Although the balance from Pack and Pay (Pty) Ltd is now outstanding for 240 days, the FM of Y&G Retailers (Pty) Ltd is confident that there is no need to make a provision for the write-off of the Pack and Pay (Pty) Ltd debt. You also read in the newspaper that Pack and Pay (Pty) Ltd applied for voluntary liquidation. It is Y&G Retailers (Pty) Ltd's policy to provide for all debt that is more than 120 days outstanding. Assume that the above is the only evidence gathered to confirm the recoverability of the Pack and Pay (Pty) Ltd debt and you can also assume that the amount is material. REQUIRED: With reference to ISA 500, discuss the appropriateness of the audit evidence gathered for the valuation of the accounts receivable balance for the Pack and Pay (Pty) Ltd debtor included in the financial statements of Y&G Retailers (Pty) Ltd. You are an Audit Trainee and your very first audit is that of Y&G Retailers (Pty) Ltd. During the audit you overheard the following conversation between the Audit Supervisor and Audit Partner: "What can be wrong with that!" asked the Audit Supervisor from the Audit Partner. "The Financial Manager (FM) told me himself that the balance outstanding owed by Pack and Pay (Pty) Ltd of R3 million is recoverable!" Pack and Pay (Pty) Ltd is one of Y&G Retailers (Pty) Ltd's biggest customers. Although the balance from Pack and Pay (Pty) Ltd is now outstanding for 240 days, the FM of Y&G Retailers (Pty) Ltd is confident that there is no need to make a provision for the write-off of the Pack and Pay (Pty) Ltd debt. You also read in the newspaper that Pack and Pay (Pty) Ltd applied for voluntary liquidation. It is Y&G Retailers (Pty) Ltd's policy to provide for all debt that is more than 120 days outstanding. Assume that the above is the only evidence gathered to confirm the recoverability of the Pack and Pay (Pty) Ltd debt and you can also assume that the amount is material. REQUIRED: With reference to ISA 500, discuss the appropriateness of the audit evidence gathered for the valuation of the accounts receivable balance for the Pack and Pay (Pty) Ltd debtor included in the financial statements of Y&G Retailers (Pty) Ltd.
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The conversation between the Audit Supervisor and the Audit Partner raises concerns about the appropriateness of the audit evidence gathered for the valuation of the accounts receivable balance for th... View the full answer
Related Book For
Accounting Information Systems
ISBN: 9780132871938
11th Edition
Authors: George H. Bodnar, William S. Hopwood
Posted Date:
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