1 July 2015 you are an Auditor for Jack and Co and you are responsible for two existing clients. Kalahari manufactures hair products and its year end 31 May 2015. You are finalising the audit programmes for the forthcoming year end-audit. Mega-Electro a distributor of electronic products and its year-end on 30 April 2015. The audit is almost complete and audit report is due to be signed shortly. The following matters have been brought to your attention; Kalahari- Receivables Kalahari year-end trade receivables are R3.85m (2014: R2.45m) and Revenue for the year is slightly increased on 2014 Kalahari has a lot of customers with balance ranging from R5 000 to R45 000. A positive receivable circularisation has been under taken based on year-end balances. The majority of customers agreed to the balances as per Kalahari receivable ledger with the following exception noted: Alba Floue Manh Balance per Kalahari R36 558 R24 115 -RS 360 (Cr) Responses from customers Nil responses R18 265 R3 450 Due to increase in receivables, Kalahari recently recruited an additional credit controller to chase outstanding receivables. As a result of additional chasing of outstanding receivables the finance director thinks it is not necessary to continue to maintain a significant amount of allowance for receivables and reduced the closing allowance from R125 000 to R5 000. Mega-Electro-Going concern During the year under audit Mega-Electro has consistently paid a number of its suppliers significantly later than usual and only after several reminders. As a result, some of its suppliers have withdrawn credit terms meaning the company must pay cash on delivery. The company has also just received notification that its main supplier who provides the company with over 60% of its specialist electrical equipment has ceased to trade. The overdraft has increased significantly over the year and the directors have informed you that the overdraft facility is due for renewal next month, and they are confident it will be renewed. The directors have decided that in order to conserve cash, no final dividend will be paid in 2015. Required: (a) Describe procedures that the auditor should perform to resolve exceptions noted for each customer during the positive receivable circularisation for Kalahari. [9 marks] N.B. Present your answer as follows: Customer Procedures Alba Floue Manh (b) Describe substantive procedures auditor should perform to obtain sufficient and appropriate audit evidence in relation to allowance for receivables in the current year. [9 marks] (c) Identify and explain three potential indicators that Mega-Electro is not a going concern. [9 marks] (d) Describe audit procedures to perform to assess whether or not Mega-Electro is a going concern. [13 marks]