Question 3 (12 marks)

As at 31 December 2019, Portal Development Limited (PD) has trade receivables of HK$20,000,000 overdue for more than one year. After some rounds of tough negotiation with the auditor, PD finally agreed to write-off the whole amount in its draft financial statements for the year ended 31 December 2019, since it failed to convince the auditor that the debts are recoverable.

After the year end, one of the debtors settled an amount of HK$6,000,000 a few days before PDs directors are due to approve the financial statements which is the same as the date of auditors report. The directors of PD prefer not to amend the financial statements to reflect the settlement of the overdue amount of HK$6,000,000 and intend to account for the impairment reversal in the year ending 31 December 2020. You are the engagement manager for the audit of PDs financial statements for the year ended 31 December 2019.

Required:

Determine your teams responsibility to identify the subsequent settlement of the overdue amount of HK$6,000,000 and suggest the relevant procedures for this event.