Question
You are the audit manager of ABC Company Limited (ABC) which is engaged in the manufacturing and trading of fashion garment. During the audit for
You are the audit manager of ABC Company Limited ("ABC") which is engaged in the manufacturing and trading of fashion garment. During the audit for the year ended 31 December 2020, you obtained the following analysis of the trade receivables.
(HK$'000) 2020 2019
Within 60 days 533,253 585,004
Between 61 days to 180 days 395,030 206,082
Over 180 days 8,087 26,040
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Trade receivable @ 31 Dec 936,370 817,126
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(ABC normally grants 60 days credit to its customers.)
Sales for the year ended 31 Dec 3,044,505 2,832,638
Industry Data :
Turnover / Receivables 4.67 times 4.56 times
Receivables Turnover (days) 78 80
Required:
Based on the above information, which assertion of the trade receivables as at 31 December 2020 you consider to be a higher risk? Please explain the risk and provide three reasons/indicators to support your view.
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