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Question 4b ii

Rose Leisure Club Co (Rose) operates a chain of health and fitness clubs. Its year end was 31 October 2012. You are the audit manager and the year-end audit is due to commence shortly. The following  matter has been brought to your attention.

Receivables

Rose’s trade receivables have historically been low as most members pay monthly in advance. However, during the year a number of companies have taken up group memberships at Rose and hence the receivables balance is now material. The audit senior has undertaken a receivables circularisation for the balances at the year end; however, there are a number who have not responded and a number of responses with differences.

Required:

Describe substantive procedures you would perform to obtain sufficient and appropriate audit evidence in relation to the above matter. (5 marks)