In the audit of Dimsim Company Ltd (Dimsim) for the financial year ended 30 June 2020, you are assigned to check the sale account totalling AU$3,000,000. You have chosen a list of invoices (column 2) of certain customers (column 3) and would like to check these invoices with the sales journal to ensure the amount has been correctly recorded. The result is presented in columns (4) and (5) in the Table below (all amounts are in AU$).

Date

(2020)

Invoice

number

Customer

Amount on

Amount on

invoices

sales journal

(1)

(2)

(3)

(4)

(5)

Jan. 11

13236

Chelsea Ltd

3,500

3,500

Jan. 22

15326

Melbourne Co.

15,550

15,550

Feb. 9

15768

Laverton Hill

26,460

26,460

Mar. 15

17524

Sydney Harbour

62,500

62,500

Apr. 25

18014

HighTech Ltd

98,000

98,000

Apr. 28

18015

Mornington Pty

205,000

205,000

June. 20

19000

Bachurch Corp.

307,600

307,600

June. 30

19008

Point Cook Ltd

200,000

20,000

June. 30

19009

Point Cook Ltd

360,000

36,000

Required:

(a)Is the audit procedure being performed a test of control or a substantive test? State the audit objective (or assertion) that the auditor would like to confirm for the sales account based on the audit procedure.

(b)Based on the result, you have determined that there are misstatements occurring in relation to invoice numbers 19008 and 19009. However, when discussing this issue with the client managers, they refuse to correct the misstatements in the financial report. State action (if any) and the auditor's opinion, given that there are no other misstatements discovered and the auditor-in-charge has indicated that any misstatement above 10% of the sales amount will be considered material. (Limit your answer to

(c)Following the same issue in (b), however the client now agrees to correct the misstatement associated with invoice 19009 after a long conversation with your team. State the auditor's opinion if the auditor-in-charge has indicated that any misstatement above 10% of the sales amount will be considered material, given that there are no other misstatements discovered? (Limit your answer to

3.2The following is anindependent and materialsituation:

A client holds a note receivable consisting of principal and accrued interest receivable. The note's maker recently filed a voluntary bankruptcy petition, but the client did not agree to reduce the recorded value of the note to its net realisable value, which is approximately 40 percent of the recorded amount.