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Assignment 1
Assignment 1
Assignment 1
After thoroughly examining Delta Company Ltd.'s financial statements and additional financial
information, I have determined that the Accounts Receivable account has a substantial risk of
severe errors or inaccuracies. The reason for this is the significant rise in the Accounts Receivable
balance in comparison to the previous year. This could suggest potential problems with collecting
outstanding receivables or recognizing income that may not be collected.
In addition, the Accounts Receivable aging report indicates a significant proportion of outstanding
sums that are past their due dates, indicating probable challenges in recovering these amounts. If the
late accounts are not adequately evaluated for impairment or adjusted for collectability, it could
result in a substantial misrepresentation in the financial statements.
In summary, the substantial rise in the Accounts Receivable balance, along with a large proportion
of overdue balances, gives rise to doubts regarding the correctness and completeness of this
account. This suggests a considerable danger of severe errors or omissions. It is advisable to do a
more thorough inquiry and examination of this account in order to appropriately address this risk.
Answer to Part 2
To determine the notable risk of inaccuracy in the Accounts Receivable account of Delta Company
Ltd., I carried out the subsequent analytical procedures:
1. Trend Analysis: I conducted a comparison between the current year's balance of Accounts
Receivable and the balance from the prior year in order to evaluate the trend. The research
uncovered a noteworthy surge in the balance, suggesting a possible problem with the recovery of
unpaid receivables or recognition of money that would not be recovered.
These analytical methodologies indicate that the Accounts Receivable account of Delta Company
Ltd. carries a substantial risk of material misrepresentation. The substantial rise in the amount,
along with a considerable proportion of overdue balances and deviation from industry benchmarks,
suggests possible concerns regarding the accuracy and comprehensiveness of this account.
Additional examination and careful analysis of Accounts Receivable are necessary in order to
properly address this substantial risk.