You are planning the audit of D Co for the year ending 30 September 2019. The company purchases computers from Japan and sells them to small computer suppliers. It has been a client of your audit firm for several years. The D Co has provided you with the following financial information and notes.

1. The company started a number of initiatives during the year in order to boost revenue. It offered extended credit terms to its customers on the condition that their sales order quantities were increased.

2. D Co. signed a new long-term contracts for the purchase of computer. The discount given by suppliers on the purchases increases with an increase in the quantity ordered. One supplier made an announcement that customers who are able to prove that they could purchase the products cheaper elsewhere can claim the difference within one month.

3. A number of computers with quality problem had already been sold and the issue was identified following a number of complaints from customers.

Required:

a. Using analytical procedure, identify areas of concern. (Show your calculations)

b. What is the possible misstatement for each area of concern?

c. List reasonable explanation(s) for each area of concern if it is not a misstatement.

(Generic explanations which are not relevant to the D. Co. will not be awarded marks)

Forecast Audited 2019 2018 000.$ $'000 Sales 7,850 4,893 Cost of Goods Sold (3,440) (2,800) Inventory 3,550 1,830 Accounts receivables 4,350 1,780 Accounts payables 1,970 1,190 The company's financial director has explained that in 2019: