1. Edge and Emma Enterprises Co is a fashion house. You are their external audit manager and three matters have been brought to your attention.

Supplier statement reconciliations

Edge and Emma receives monthly statements from its main suppliers and although these have been retained, none have been reconciled to the payables ledger as at 31 March 2021. The engagement partner has asked the audit senior to recommend the procedures to be performed on supplier statements.

Bank reconciliation

During last years audit of Edge and Emmas bank and cash, significant cut off errors were discovered with a number of post year-end cheques being processed prior to the year end to reduce payables. The finance director has assured the audit engagement partner that this error has not occurred again this year and that the bank reconciliation has been carefully prepared. The audit engagement partner has asked that the bank reconciliation is comprehensively audited.

Receivables

Edge and Emmas receivables ledger has increased considerably during the year, and the year-end balance is RM2.3 million compared to RM1.4 million last year. The finance director of Edge and Emma has requested that a receivables circularisation is not carried out as a number of their customers complained last year about the inconvenience involved in responding. The engagement partner has agreed to this request, and tasked you with identifying alternative procedures to confirm the existence and valuation of receivables.

Required:

(a) Describe substantive procedures you would perform to obtain sufficient and appropriate audit evidence in relation to the following matters.

(i) Supplier statement reconciliations

[15 marks]

(ii) Bank reconciliation

[15 marks]

(iii) Receivables

(b) Differentiate between operational audit and compliance audit.