The Turnover of Sunflower Ltd
The Turnover of Sunflower Ltd
The Turnover of Sunflower Ltd for the year ended 31 May 2020 was £7.5 million, its draft profit before tax was £200,000 and its net assets £1.8million. At that date the sales ledger contained 140 live accounts totalling trade receivables of £1.6million. The accounts can be broken down as follows:
| Value range | Number of | |
| balances | ||
| £100,000 to £150,000 | 2 | |
| £50,000 to £100,000 | 6 | |
| £10,000 to £50,000 | 40 | |
| £1,000 to £10,000 | 60 | |
| £0 to £1,000 | 29 | |
| Credit balances (all less than £1,000) | 3 | |
| 140 |
The auditor is to use direct confirmation to confirm trade receivables balances.
Required:
- List the factors which should be taken into account when selecting a sample of receivables for direct confirmation and how those factors should be applied to Sunflower Ltd.’s trade receivables. (15 Marks)
- Set out the procedures to be performed:
- When planning and performing the direct confirmation. (5 Marks)
- When following up the results of direct confirmation. (5 Marks)
