Dont Panic Ltd (Dont Panic) operates a fire risk assessment business that is contracted by apartment complexes and other businesses to review and monitor their fire alarms and equipment on a monthly basis. The business has twenty (20) mobile vans which are operated by two (2) service staff each. The head office has 8 administrative staff, two (2) sales staff and two (2) risk management officers who provide telephone advice to their clients. The business has operated for over 9 years. The companys year-end is 31 December 2012. You are the audit senior of Young & Old, and are currently preparing the plan of substantive audit procedures for the year end audit of Dont Panic. You are reviewing the notes of last weeks meeting between the audit manager and finance director where material areas of concern were discussed.

1. Customers Customers pay monthly in advance for monitoring services provided by Dont Panic. Where faults arise and the customer calls Dont Panic out to the customers premises, the customer pays after an invoice is sent. Invoices for customer call-outs are sent out at the end of the month.

2. Long Term Contract Dont Panic has recently (1 December 2012) signed a long-term contract to provide monitoring services to a government department for the next three (3) years. Payment by the government in relation to this contract occurred at the date of signing and Dont Panic has put these funds in an 18 month deposit account.

3. Takeover On 1 November 2012, the management of Dont Panic entered into an agreement to purchase the net assets of their main competitor, ARP Ltd. The purchase must first be approved by the shareholders of ARP Ltd, but it is the view of both boards of directors that this will occur. If approval does occur, the net assets will be officially purchased on 1 February 2013. The management of Dont Panic would like to include the net assets in this years accounts due to the agreement having been made.

4. Fire Extinguishers Dont Panic also offers services where they plan the fire prevention and detection requirements of new and existing buildings. The sales office, located at the head office, is used by sales staff to meet with new customers and show them the services offered by the company. In the corner of the sales office is a showroom which displays a range of products, including fire extinguishers, alarms and monitors, and safety equipment. Where customers identify a product they require a special order is made to purchase them as the items can be highly specialised. All products in the display are required to be compliant with current standards and the cost of doing this twice a year is $2 million.

Required: Based on the specific information above: (a) Describe two (2) substantive procedures that you would use for testing the details of transactions and balances of the class of transaction or account affected by each of the above material areas of concern. Note ensure that you specifically identify the transaction and/or account you are gaining evidence regarding. (b) For each of the audit procedures described in (a), explain the specific assertion for which that procedure provides evidence.