80.2K

Verified Solution

Link Copied!

You are in charge of creating an audit program for notes receivable for Redwood Appliance Retailers. The company sells appliances and electronics to customers for their homes or small businesses. Redwood Appliance has ten store locations in different cities located in Northern California. One of Redwood's unique competitive advantages has been its ability to offer more attractive credit terms for appliance purchases for their customers relative to traditional credit cards. Thus, most of their sales involve Redwood- financed purchases by their customers. As part of obtaining an understanding of the client's business and industry, you learned that some of the stores are located in cities that have recently experience higher rates of unemployment. a. What are the key economic factors facing the company and its industry? b. Describe significant business risks related to the industry. What potential risks of material misstatements exist based on the answers to the previous questions? Be specific mentioning which account is at a higher risk and which audit objective would you want to emphasize when doing your audit testing. d. How would you address these risks during your audit? C. 12/31/19 12,778,370 1,512,400 94,500 120,591 12/31/18 10,975,139 1,082,480 78,750 108,645 Sales Accounts Receivable Allowance for doubtful accounts Bad debt charge-offs Accounts Receivable 0-30 days 30-60 days 60-90 days Over 90 days TOTAL 941,887 266,982 180,438 123,093 1,512,400 729,793 169,038 111,297 72,351 1,082,480 You are in charge of creating an audit program for notes receivable for Redwood Appliance Retailers. The company sells appliances and electronics to customers for their homes or small businesses. Redwood Appliance has ten store locations in different cities located in Northern California. One of Redwood's unique competitive advantages has been its ability to offer more attractive credit terms for appliance purchases for their customers relative to traditional credit cards. Thus, most of their sales involve Redwood- financed purchases by their customers. As part of obtaining an understanding of the client's business and industry, you learned that some of the stores are located in cities that have recently experience higher rates of unemployment. a. What are the key economic factors facing the company and its industry? b. Describe significant business risks related to the industry. What potential risks of material misstatements exist based on the answers to the previous questions? Be specific mentioning which account is at a higher risk and which audit objective would you want to emphasize when doing your audit testing. d. How would you address these risks during your audit? C. 12/31/19 12,778,370 1,512,400 94,500 120,591 12/31/18 10,975,139 1,082,480 78,750 108,645 Sales Accounts Receivable Allowance for doubtful accounts Bad debt charge-offs Accounts Receivable 0-30 days 30-60 days 60-90 days Over 90 days TOTAL 941,887 266,982 180,438 123,093 1,512,400 729,793 169,038 111,297 72,351 1,082,480

Answer & Explanation Solved by verified expert

See Answer