You have been the auditor of Crossborder Trading Company Ltd. for a number of years. The company‘s head office is in Nairobi, Kenya and if has considerable overseas operations. At each accounting year end, there are large debts due from overseas agents of the company (Sh. 270 million out of total debts of Sh. 680 million as at 31 December 2000). In the past, these debts have always been settled after year end but you have insisted that the debts be the subject of a specific representation made by the company‘s director. Required:Outline the audit work which should be performed when seeking evidence to substantiate the management‘s representations as drafted and indicated the value of the directors‘representations in these circumstances. You should present your answer under the following headings: Existence and title., Valuation and disclosure

Audit procedures Existence and title
i) Carry out a debtors circularisation i.e. send the debtor a circular. If they reply, then at least one can be assured they exist and whether or not they owe the company any money.
ii) Verify if there are any payments that have been received from these debtors after year end.
iii) In the absence of any contradiction, the directors‘ representations would be relied upon.


i) I would check that the balance is made up of specific invoices relating to recent transactions and enquiring into any balances which appear to be dispute or old.
ii) Verify if there are any payments that have been received from these debtors after year end.
iii) I would discuss with management the recoverability of balances that are in dispute or appear doubtful.
iv) Seek any information that could indicate that some of the debtors might be unable to pay e.g. bankruptcy of a debtor.


i) Compare the method of disclosure adopted by management with what is recommended by IAS and company‘s Act e.g. is the debt shown net of any provisions if necessary. Verify that the debtors are correctly classified as current assets;
ii) Management should confirm in their representation that they have disclosed all the relevant information in relation to debtors.

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