Hoopoe plc is an old established large food processing company mainly buying poultry from local farmers, freezing them and selling them to retailers on credit terms. Assets employed total £6m, revenue £15m, profits are £1.8m and receivables are £3m. The company has excellent internal controls which the auditors have evaluated at the interim audit. The auditors are examining the receivables schedule. They find that there are 3,900 items upon it. Four balances are over £100,000, being to large supermarket chains; 162 balances totalling £114,000 are for customers overseas.

Discussion
- Discuss the tolerable misstatement level that might be acceptable in the case of receivables.
- What audit risk factors are relevant? What substantive tests and analytical review techniques will enable the audit or to reduce the detection risk?
- Outline the stages of a suitable audit sampling approach to the receivables in this case, determining the audit objectives, the population, the sampling unit, the definition of error, the sample selection method and the sampling method. In each area, discuss the difficulties which might be encountered.