You are the audit senior on the Wendig Limited (Wendig) engagement and have commenced planning for the 2019 audit. You have been able to obtain the following information concerning the various segments of the business:

A. Inventory Balances and Purchase Transactions Although fairly voluminous, purchase transactions at Wendig are not complex. Inventories are tightly controlled so that overstocking and obsolescence are normally not a problem. Inventory, although not as liquid as cash, is subject to theft. At Wendig, finished packaged products are shipped immediately to customers, although large quantities of purchased merchandise are maintained on hand. The personnel handling purchases and inventory transactions are, in general, competent. Access to warehouse is unrestricted.

B. Trade Receivables and Credit Sales System These transactions are not particularly complex at Wendig, nor (except for the allowance for doubtful debts account) is there any degree of estimation involved. The persons processing revenue and trade receivables transactions are thoroughly familiar with the procedures and are generally competent. Sales transactions processing does, however, entail the completion of many transactions. Competition from overseas is becoming an issue, and because of the poor general economic conditions some customers have requested extensions of time to pay.

C. Property, Plant and Equipment (PPE) There are generally few fixed asset transactions. The transactions are often not complex but an element of risk can be introduced when management has to make decisions concerning whether to capitalise or expense items. PPE, being less liquid than other assets, is generally not subject to theft. In recent years a number of PPE items have been manufactured in-house. You have noticed, as a result of your analytical procedures, that repairs and maintenance expense has dropped considerably in the last two years. Asset registers are maintained on a timely basis, and staff are generally competent.

D. Trade Payables Transactions and Balances Although not complex, the volume of trade payables transactions is high. There is a risk with trade payables balances that personnel may fail to record them in the books, as the company has applied to the bank for an increase in its overdraft and wants to impress the bank with a strong current ratio. At Wendig a request form is first prepared for all items that are to be paid through the cash disbursements system. The previous trade payables clerk, who had been with the company for eight years, left in December 2018. A new clerk was hired but is not yet thoroughly familiar with the procedures.

Required:

For each of the above account balances and classes of transactions (provide justifications in each case):

1. Determine any significant risks with reference to relevant facts;