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Why are they not shown? Are they not included within earnings and we have to exclude them?
If there are too many questions, kindly respond only to the more serious ones, specifically those where I am making logical blunders…
Much thanks for your time!
Here is a list of procedures that I thought of:
Obtain a breakdown of the calculation for the receivables collection period, inspect for errors, compare with prior years and discuss inc with management.
Recast the list of individual customer balances and compare with trial balance and draft financial statements to ensure accuracy.
Review post-year-end receipts and after-date bank statements and inspect for any receipts from doubtful customers (OLD/SLOW-MOVING) that were previously allowed for through a bad debt allowance before the year end.
Inspect board minutes to establish the concerns that the directors have and any decisions made by directors related to irrecoverable debt allowances. Assess the reasonableness of their decision and justification.
Review customer correspondence between encore co and its receivables to establish whether any customer has significant liquidity problems that have led to the potential irrecoverability of their outstanding balance and hence the increase in year end receivables as well as bad debt allowances.
(Maybe I should have written “the increase in receivable days.”)Compare the current year receivables, specifically significant customer balances, with those of the prior years, and investigate any major fluctuations.
Discuss with management the impact of the credit controller leaving the company and the steps taken to ensure timely receipt of outstanding balances from customers in the absence of a credit controller. (Is this one correct?)
Discuss with the newly hired credit controller the criteria for creating a bad debt allowance against potentially irrecoverable balances and if this criteria has changed in recent months and could somewhat account for the significant increase in receivables’ allowance. (Is this one correct?)
Thank you very much for your very comprehensive reply!
I truly appreciate it!
I would ensure that I add the relevant year/attempt from which I have borrowed the question in the future.
The complete sentence is: Financing of the company via equity alone is not consistent with maximising shareholder wealth, since it deprives shareholders of the benefits of debt finance, which is cheaper than equity.
Maybe they mean that it is cheaper to avail debt finance like buying loan notes is cheaper for financiers in comparison to buying shares in a company??
Is my assumption correct?
How does buyback schemes work? Like if i am a director and i know i will receive shares as bonus on 1st jan. Then, i will buy back a huge chunk of company’s share capital on 31st Dec so the denominator (total shares in issue) falls, EPS rises and share price rises for me to profit from it.
RIGHT? but don’t they get caught?
Hello, thank you for your response!
I truly appreciate it.
In the same question, the auditor’s response is:
Perform a review of after-date purchase invoices to determine if any relate to the current year. If any do relate to the current year, agree them to the accruals listing.
Does this mean that as auditor, we have to assess if any purchases were received by the company during the year but paid for later after the year-end. So we check the post year-end invoices and if we find that item A was paid for after year end (but delivered by supplier before year end), we strike it off the accruals list??
Is this what’s happening??
Also, I hope that you have a wonderful holiday.