In January 2017, Monastiraki launched its new 'Flexible and Adaptable' sales strategy designed to expand its market share. Under this strategy, selected sales staff in key markets have been given autonomy to make decisions relating to pricing within a 10% range of the company's master price list. Sales staff are also permitted to apply further discounts with the approval of their area sales manager. In conjunction with this, the company has also employed a dedicated business development manager, Petros, to monitor competitor behaviour. Based on his analysis, Petros is authorised to update the company's master price list on a continual basis to the extent he considers necessary for Monastiraki to remain competitive. This new strategy has proven very successful, with Monastiraki experiencing strong growth in sales and the number of customers. Monastiraki's receivables manager, Greg has reported a hard time keeping up with this growth and the changes that have been implemented. Greg and his team are having difficulties in reconciling sales prices with the company's master price list due to the frequent price changes. There have also been instances of discounts applied to sales without the necessary approval being recorded. Consequently, reconciliations of receivables and receipts for the last few months have not been finalised.

(a) Identify the key assertion at risk and outline your assessment of inherent risk and control risk in relation to Monastiraki's trade receivables account. [4 marks]

(b) For the assertion identified in (a) above in relation to the trade receivables account, identify the appropriate audit approach and the nature (tests of controls, substantive analytical procedures, substantive tests of details) and extent (none, small, medium, extensive) of audit procedures to be undertaken. Justify the audit approach you have suggested. [4 marks]

(a) Key assertion: Inherent risk assessment Control risk assessment (b) Audit approach: Procedure Extent Test of controls Substantive analytical procedures Substantive tests of details Justification