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Deficiency: Fox has a policy of delaying payments to their suppliers for as long as possible.
Whilst this maximises Fox’s bank balance, there is the risk that Fox is missing out on early settlement discounts.
This can lead to a loss of supplier goodwill as well as the risk that suppliers may refuse to supply goods to Fox.Recommendation: Fox should undertake cash flow forecasting/budgeting to maximise bank balances. The policy of delaying payment should be reviewed, and suppliers should be paid in a systematic way, such that supplier goodwill is not lost.
maam don’t you think the above deficiency and recommendation is more closely associated with business risk than audit risk?
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