Tutorial Questions for Week 4 – Analysing Assets.docx - Tutorial Questions for Week 4 – Analysing Assets Question 4-3 a The 2 most important

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Tutorial Questions for Week 4 – Analysing Assets Question 4-3 a. The 2 most important questions an analyst is faced with about receivables are about collection risk and authenticity of receivables. Is the receivable genuine, due and enforceable? Has the probability of collection been properly assessed? While the unqualified opinion of an independent auditor lends some assurance regarding these questions, the financial analyst himself must recognise the possibility of an error of judgement as well as lack of complete independence. b. The description of the receivables in the notes to financial statements is not enough to reliably judge whether a receivable is actually genuine, due and enforceable. There are supplementary sources of information that may be used for further assurance: In some industries, this includes a substantial right of merchandise return Most provisions for uncollectible accounts are based on past experience although
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  • '18
  • Yunyan Zhang

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