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PRACTICAL AUDIT ON TRADE PAYABLE AND TRADE RECEIVABLE (Question)

Practical Audit Questions on Trade Payable and Trade Receivable as follows:

Question 1

Recently Gold Trading Group Co faces problem of controlling trade receivable after financial manager resigned.

Shareholders of company suspect a few trade receivables are incorrect, so they require internal auditor check one customer, Trading Co, as first sample. This customer trade receivable is required to check from beginning of business relationship with Trading Co until today.

List of Individual trade receivable for each customer as follows:

ABC 10,000
Top Trade 5,000
Premium Group 2,000
XZY 20,000
Trading Co 3,000
AZC Group 7,000
ATB 9,000
OTC Co 300
AQZ 6,000
TYU 15,000
Total 77,300

Required:

Ending balance of trade receivable for Trading Co is $3,000; the first day of business relationship with Trading Co is 20 January 2015 and today is 2 November 2016. You are required to list and explain practical internal audit procedures for this case.

Question 2

AZC Import and Export Company is medium company that has significant trade payables while trade receivable is controlled strictly. At past time 20 Feb 2013, AZC purchased a meeting table of $2,000 from a supplier, World Diamond Group, and company paid on 1 March 2013, but on 15 March 2013, World Diamond Group issued invoice again and company paid without checking detail.

The following trades payable for each vendor as of 02 November 2016 are as follows:

QTG 908,000
Great One Co 7,000
Import and Export  Co 9,000
TBK Shop 15,000
QAX 5,000
Top One 32,000
World Diamond Group 10,000
PPY Co -6,000
Trading Co 5,000
AEL Group 13,000
 Total 998,000

 Required:

  1. Explain practical possible reasons which make trade payable of PPY Co become negative figures.
  2. You are required to audit World Diamond Group trade payable for all transactions from 16 March 2013 to 2 November 2016; we may assume that trade payable on 15 March 2013 is $9,500, so movement amount of trade payable increases by $500 ( $10,000 – $9,500). List and explain practical ways that you, internal auditor, should use for checking this trade payable.

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