The year-end audit of Shine Ltd is due to commence shortly. The following two matters have been brought to your attention. (i) Bank reconciliation During last year’s audit of Shine’s bank and cash, significant cut-off errors were discovered with a number of post year end cheques being processed prior to the year end to reduce payables. The finance director has assured the audit engagement partner that this error has not occurred again this year and that the bank reconciliation has been carefully prepared. The audit engagement partner has asked that the bank reconciliation is comprehensively audited.
(ii) Receivables Shine’s receivables ledger has increased considerably during the year, and the year-end balance is £2.3 million compared to £1.4 million last year. The finance director of Shine has requested that a receivables circularisation is not carried out as a number of their customers complained last year about the inconvenience involved in responding. The audit engagement partner has agreed to this request and tasked you with identifying alternative procedures to confirm the existence and valuation of receivables.
Describe substantive procedures you would perform to obtain sufficient and appropriate audit evidence in relation to the above two matters.
