You are responsible for the audit of FDL Steel Fabrication Ltd. Most of the companys customers are development or construction companies involved in the building of shopping centres, office complexes, warehouses and other large-scale building constructions.

During the planning stage, you observe that the building industry is in a period of severe decline. You note that this increases the risk associated with the misstatement of several material account balances, including the risk of not identifying and appropriately accounting for potential bad debts.

The companys credit manager, appointed near the beginning of the financial year, regularly reviews the aged list of trade receivables. You have determined, provided this procedure is effective, that it is the only internal control specifically addressing this significant risk upon which you could place reliance.

Required:

1. Recommend four additional practical and effective internal control procedures the company could introduce to mitigate this risk

2. Towards year-end, you find evidence that the credit manager is, and always has been, incompetent. Describe how this would affect the nature, timing and extent of substantive

   procedures.