a.) You are the auditor of PAWS Treats Inc., a company that manufacturs doggy treats. The description of the sales and collection cycle for PAWS Treats Inc. is as Follows:

Clients and Credit Limits:

PAWS treat Inc. has 75 clients selling primary to pet specialty stores. For each customer, Paws Treats Inc performs a credit check prior to setting a credit limit for the client. The credit limit is reviewed each year. In the past year, the credit limitd for all customers were increased bu 10%. This is due to the growth Paws treats Inc product lines and increased demand from customers. This also came at the same time the CEO of Paws Treats Inc set the objective of growing the companys revenue by 25% over the next wo years. Increasing the credit limit has helped Paws Treat Inc move towards that objective.

Allowance for Doubtful Accounts:

The allowance for doubtful accounts is calculated by the controller by taking a percentagte of total sales for the month. The controller has been taking 3% of total sales. The estimate has not been revised in the current year, but it has always been sufficient to cover for any write-offs incurred.

Required:

For each of the two areas discussed above, identify the risk areas and the most likely misstatements for Paws Treats Inc.