You are the audit senior currently auditing the financial accounts of Small Ltd. As part of your audit tests you need to send out ‘debtors circularisation’ letters.

Jagdish, the company accountant, has suggested that you should not contact the company’s largest customer, Large plc, to confirm the balance due from this customer at the year-end because Large plc is a well-known company and so there should be no need to contact them regarding their unpaid invoices. He suggested that you should simply accept that Large plc will eventually pay these invoices. Jagdish is worried that Large plc may become upset if the you, the auditor, contact them since the relationship with Large plc is quite sensitive at present.

As at the company’s year-end, several sales invoices amounting to 8.6% of total sales for the year from Large plc are over four months overdue for payment despite the credit term being one month.

Required:

a) Explain the right of the auditors with regards to access to their audit clients’ financial records, information and explanation during the course of the audit.(2 marks)

b) Set out the audit work you would perform in respect of these large overdue unpaid invoices from Large plc.