(d)
(ii) Specific receivables for selection:
1. Large or material items. These will be selected partly to ensure that no material error has occurred and partly to increase the overall value of items tested.
2. Negative balances. There are 15 negative balances on Seeley’s list of receivables. Some of these will be tested to ensure the credit balance is correct and to ensure that payments have not been posted to the wrong ledger account.
3. Receivables in the range $0 to $20,000. This group is unusual because it has a relatively higher proportion of older debts. Additional testing may be necessary to ensure that the receivables exist and to confirm that Seeley is not overstating sales income by including many smaller receivables balances in the ledger.
4. Receivables with balances more than two months old. Receivables with old balances may indicate a provision is required for non-payment. The lack of analysis in Seeley Co’s receivable information indicates a high risk of non- payment as the age of many debts is unknown.
5. Random sample of remaining balances to provide an overall view of the accuracy of the receivables balance.
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