his question is taken from a 10.7 of thFal Admitting Examinat Paper dmitting Exa

Question

his question is taken from a 10.7 of thFal Admitting Examinat Paper dmitting Examination ICAI. Only the dates hav of You are undertaking the F chan the audit of the financial CAREFREE Limited forts o Red 0f December 2015. CAREFREE operates a network of six privoes ing homes, each with facilities 50 patients. In each home sme up to patients are temporary patientse ating from acute illness,lecuper long term. The company has ate Ot pan rapidly. following a change in owne and management in Marc04er which it had only two nursing homes operation for several years. Prior to Each home is under the control of a matron, who authorizes all admissi staff consists of part-time and full-tim nursing staff, as well as part-time emplow ees dealing with areas such as catering cleaning and maintenance. Before the change in ownership and management each of the two homes arranged the billing of its own clients (usually relatives of the patients have responsibility for payment) and dealt with all queries and collec tions. As the business expanded, it was considered necessary to recruit an account- ant/administrator who, as well as dealing with payroll matters, has implemented a centralized PC-based billing system for income and trade receivables. You have noted the following aspects of the billing system: . There is a standard daily residential charge (which may differ from home to home), which is used as a basis for monthly bills. Each matron has a lim- ited discretion to allow reductions from the standard charge in cases of excep tional hardship. Matrons are expected to notify the accountant/administrator by telep on a daily basis of all changes in pancy . Th e accountant/administrator ied by telephone on a weeky

Explanation / Answer

To,

The Management,

CAREFREE Limited.

Sub: Suggestions and recommendations to improve the billing system:

Respected sir/ madam,

This is letter is in reference to the above subject matter. The billing system within the organization is not free from faults. Thus, this letter has been written to provide some suggestions to improve the existing billing system. The following changes must be made in the existing billing system to improve the current billing system:

Place:

Dated:             

                                                                                                            Regards.

(Name of the student)    

     

Two aspects of audit of trade receivables:

Two aspects of audit of trade receivable are provided below:

The accounts confirmation shall be used by the auditor by sending confirmation letter to the individual customers and debtors of the company, especially the accounts which are showing large amount of money receivables to confirm these are correct and actually receivable to the company.

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