Question
TchicTchac Ltd is a company that is involved in website designs and provides back end IT solutions to SMEs. Its year-end was 31 October 2021.
TchicTchac Ltd is a company that is involved in website designs and provides back end IT solutions to SMEs. Its year-end was 31 October 2021. The audit is almost complete and the financial statements are almost ready to be signed by the directors. The finalised turnover for the year is Rs 22.4 million and profit before tax is Rs7.6 million. After year end a major customer, with a receivables balance at the year-end of Rs.500, 000, has just notified TchicTchac Ltd that it is experiencing liquidity problems and is not able to operate as a going concern. The finance director has informed the auditor that he will write this balance off as a bad debt in the 2022 financial statements and will not amend the current financial statements, i.e. year ended 31 October 2021. REQUIRED (i) Discuss whether the financial statements for the year ended 31 October 2021 should be amended further to the non-recoverability of the debt. [10 marks] (ii) Describe detailed audit procedures which should be performed on the amendment.
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