Task 6

Trade Receivables

Changes in position. Time to exercise checks.

Here is the background information on your task

We’re nearly there, last stop before handing in the financial statement – trade receivables! The auditor checks the trade receivables for two reasons:

  1. The position in the annual financial statements is material (materiality comparison)
  2. Our knowledge from previous years shows that the age structure of accounts receivable is critical (BAF comparison)

Here is your task

The change in the position versus the previous year also shows that the accounts receivable figure has gone up sharply, while bad debt provisions increased only slightly.

What could the reasons for this be:

  • Has customer payment behaviour deteriorated?
  • Did a large number of major events take place towards the end of the year?
  • Has the hotel expanded?

Kevin has assembled some possible risks for you below. Choose the assertion (audit objective) that appears most important to you in this situation. In the solution, we then outline possible audit procedures aimed at achieving this objective.

To complete this task, answer the multiple-choice quiz.

This experience is self-paced. However, Kevin is completing the statement in 1 hour and need your valuable input. We recommend you spend no more than that completing this task.

Ready? That was your final task below.

Resources to help you with the task

Resources for the task

Use the linked PDF for helpful guidance on completing your task.