Arum and Lily plc is an unlisted company whose financial year ended on 31 October 2018. The company’s auditors are currently undertaking the final audit work. Bridget, an audit senior, has been given the responsibility of auditing the company’s trade debtor balances. The following relevant information is available in respect of Arum and Lily’s sales for the year ended 31 October 2018 and its trade debtor balance at that date, together with comparative figures above for 2017.

During the financial year that ended on 31 October 2018, the company lost market share, and one of its principal customers has gone out of business. The budget for the current financial year (ending 31 October 2019) forecasts total sales of £7.2 million.

Requirements:

(a) Explain the purpose of undertaking analytical review procedures in the audit of financial statements, and identify the stage(s) of the audit in which analytical review procedures are typically used.

(b) What are the main differences between statistical sampling and judge mental sampling?

(c) Analytically review the figures provided for Arum and Lily’s sales and debtors, identifying any significant points on which more information is required.

 

2018 2017 Sales 7,664,600 8,057,430 Debtors 832,550 (22,400) 827,400 Less: allowance for bad and doubtful debts (28,500) 810,150 798,900 Number of debtor accounts in the sales ledger 446 612