Challenging LO 4, 5 9.10 Substantive audit program for accounts receivable Your client is BigC Ltd., a large private firm with offices in all major cities of Canada. BigC specializes in selling concentrated fruit juices to Canadian 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 accounts receivable for the year ending June 30, 2020, and have gathered the following information: 1. The Vancouver office recently won a large contract to supply an overseas supermarket chain with concentrated orange juice 2. For the month of January, the Toronto office ran a sales promotion that allowed new customens double the normal credit terms of 30 days. Several new large customers took advantage of this offer. Challenging 9.10 Substantive audit program for accounts receivable Your client is BigC Ltd., a large private firm with offices in all major cities of Canada. BigC specializes in sellin perform the audit. You are currently completing the planning work for the audit of accounts rece for the year ending June 30, 2020, and have gathered the following information LO 4,5 ng concentrated fruit juices to Canadian and overseas buyers. This is the first year your firm will 1. The Vancouver office recently won a large contract to supply an overseas supermarket chain with concentrated orange juice. 2. For the month of January, the Toronto office ran a sales promotion that allowed new customers this offer. double the normal credit terms of 30 days. Several new large customers took advantage of 3. The Montreal office has been experiencing a higher than usual level of sales returns owing to mould growth in a batch of guava juice You have calculated the receivables turnover ratio and receivables to total assets ratio for each of the branch offices, as shown in the tables below Receivables Turnover Ratio 8 Months to February 2020 12 Months to June 2019 12 Months to June 2018 Office Victoria Vancouver Calgary Toronto Ottawa Montreal Halifax 8.0 7.5 5.2 10.1 8.8 8.5 5.9 9.2 9.1 6.0 8.5 9.0 7.9 6.0 10.1 9.2 7.1 9.5 9.0 7.1 6.0 Receivables to Total Assets Ratio 12 Months to June 2018 8 Months to February 2020 0.25 0.15 0.18 0.15 0.23 0.17 0.19 12 Months to June 2019 0.12 0.15 0.14 0.16 0.16 0.30 0.25 Office Victoria Vancouver Calgary Toronto Ottawa Montreal Halifax 0.10 0.15 0.12 0.17 0.20 0.15 0.22 Required a. List the questions you would ask of management in relation to the accounts receivable of each of the branch offices. b. Describe additional audit work you would perform to satisfy yourself that accounts receivable were fairly stated Source: Adapted from Professional Year Programme of the ICAA, 1997. Accounting 2 Module
