- 15 Marks
AA – L2 – Q48 – Audit Sampling
List factors for selecting a sample of receivables for confirmation and apply them to Henley Co.'s receivables. Set out procedures for planning, performing, and following up receivables confirmation for Henley Co.
Question
The revenue of Henley Co. for the year ended 30 June 20X8 was C7.5 million, its draft profit before tax was C200,000 and its net assets C1.8 million. At that date the receivables ledger contained 140 live accounts totalling trade receivables of C1.6 million. The accounts can be broken down as follows:
| Value range | Number of balances |
|---|---|
| C000 | 2 |
| 100-150 | 6 |
| 50-100 | 40 |
| 10-50 | 60 |
| 1-10 | 29 |
| 0-1 | 3 |
| Credit balances (all less than C1,000) | 140 |
The auditor is to use direct confirmation to confirm receivables balances.
Required
(a) List the factors which should be considered when selecting a sample of receivables for confirmation and how those factors should be applied to Henley Co.’s receivables.
(b) Set out the procedures to be performed:
(i) when planning and performing the confirmation
(ii) when following up the results.
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