Your client is BigC Ltd, a large private firm with offices in all major cities of the
Question:
Your client is BigC Ltd, a large private firm with offices in all major cities of the UK. BigC specialises in selling concentrated fruit juices to UK and overseas buyers. This is the first year your firm will perform the audit. You are currently completing the planning work for the audit of trade debtors for the year ending 30 June 20X2, and have gathered the following information:
The Northtown office recently won a large contract to supply an overseas department store chain with concentrated orange juice.
For the month of January, the Southtown office ran a sales promotion that allowed new customers double the normal credit terms of 30 days. Several new large customers took advantage of this offer.
The Easttown office has been experiencing a higher than usual level of sales returns due to a mould growth being discovered in a batch of the concentrated guava juice.
You have calculated the debtors’ turnover ratio and debtors to total assets ratio for each of the branch offices. These are shown below.
Required
(a) What questions would you ask of management in relation to each of the branch office’s debtors?
(b) What additional audit work would you perform to satisfy yourself that debtors were fairly stated?
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