- 10 Marks
AAA – L3 – Q31 – Planning
Analyze draft financial statements of Meal Haven Ltd using analytical procedures to assess audit impact on accounts receivable.
Question
Your audit and assurance firm has just accepted a financial statement audit engagement from Meal Haven Ltd, a restaurant that prepares lunch for the general public and on special orders. The company operates at a number of sales points in the city.
The company uses a computerised system that has networked all the sales points to its head office. Your firm is planning the new audit and has received the draft financial statements for the year. As the audit senior to lead the engagement team, you are examining the financial statements, an extract of which is shown below:
Statement of Profit or Loss (Extract)
| Draft 2015 | Audited 2014 | |
|---|---|---|
| GH¢’000 | GH¢’000 | |
| Revenue | 16,346 | 11,300 |
| Cost of Sales | 12,912 | 8,596 |
| Gross Profit | 3,434 | 2,704 |
| Net Profit | 1,962 | 1,130 |
Statement of Financial Position (Extract)
| Draft 2015 | Audited 2014 | |
|---|---|---|
| Non-current Assets | 5,598 | 5,232 |
| Other Current Assets | 3,492 | 2,254 |
| Accounts Receivable | 3,964 | 2,872 |
| Inventories | 1,291 | 860 |
| Accounts Payable | 1,028 | 920 |
Required:
(a) Using analytical procedures at the planning stage, state your observations drawn from the extracts from the draft financial statements and how they may impact on your audit of accounts receivable.
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