Stella Black has been appointed as senior audit manager of the accounts receivable area in the statutory audit of Vast Vessel Voyages (VVV), a company operating leisure cruises from ports on the eastern seaboard of Australia. VVV sells cruises to individuals (via its website) and to travel agents for resale to customers. All cruises are paid in advance, with a 15 per cent deposit on booking and the remainder collected at least three weeks prior to sailing. Travel agents collect money from their customers, deduct their commission and forward the remainder to the cruise company before the deadline. Stella has made a preliminary assessment that the client is low risk and plans to conduct extensive testing of controls in the accounts receivable area to support her assessment.

Required

(a) What is Stella’s objective in testing of controls over accounts receivable?

(b) List some procedures Stella could use to achieve her objective.

(c) Assuming Stella achieves her objective, discuss the implications for the nature, timing and extent of substantive testing of accounts receivable.