Question 4 - Revenue and Receivables Background Hopscotch Limited manufactures toys. They have been in business for over 20 years and they sell to a wide variety of customers including large and small toy retailers across the country. The company's year-end is 31 December The company has a large manufacturing plant, four large warehouses and a head office Upon manufacture, the toys are stored in one of the warehouses until they are despatched to customers. The company does not have an internal audit department. Sales ordering, goods despatched and invoicing Each customer has a unique customer account number and this is used to enter sales orders when they are received in writing from customers. The orders are entered by an order clerk and the system automatically checks that the goods are available and that the order will not take the customer over their credit limit. For new customers, a sales manager completes a credit application; this is checked through a credit agency and a credit limit entered into the system by the credit controller. The company has a price list, which is updated twice a year Larger customers are entitled to a discount; this is agreed by the sales director and set up within the customer master file Once the order is entered an acceptance is automatically sent to the customer by mail/email confirming the goods ordered and a likely despatch date. The order is then sorted by address of customer. The warehouse closest to the customer receives the order electronically and a despatch list and sequentially numbered goods despatch notes (GDNs) are automatically generated and, before they are sent out, a second member of the team double checks the despatch list to the GDN, which accompanies the goods. . The warehouse team pack the goods from the despatch list Once despatched, a copy of the GDN is sent to the accounts team at head office and a sequentially numbered sales invoice is raised and checked to the GDN. Periodically a computer sequence check is performed for any missing sales invoice numbers. Required: a) Recommend SIX (6) tests of controls the auditor would normally carry out on the sales system of Hopscotch, and explain the objective for each test. (12 marks) b) Describe substantive procedures the auditor should perform to verify Hopscotchs (8 marks) year-end receivables balance