stupid, gullible, or both ;-), page-22

MJS,

Technically, you are right. The auditor does not need to verify that debtors outstanding after year end were paid for after year end. However it provides a good degree of comfort to the auditor that the debtors are RECOVERABLE.

Everyone,

Been thinking long and hard about the NBS accounts. In the case of NBS, PKF would have noted the outstanding debts and considered whether the amounts stated in the accounts are recoverable. Given that government debts are mostly considered to be gilt-edged i.e. governments rarely default on debts, they would have taken a fair amount of comfort in the recoverability of the debt.

Given the shortfall in revenues from Malaysia, and the observation about how revenues from China magically increased to fill the shortfall from Malaysia (pointed out by Ousia), I am more concerned about the EXISTENCE of the debts rather than their RECOVERABILITY. Question crossing my mind is whether the revenue from China may possibly have been 'fudged' to roughly meet NPAT forecasts made by the company. For that I am hoping that PKF confirmed the outstanding debtor balance with the customer in China directly rather than rely on say just invoices issued by NBS. One trick used by companies in the past is to issue invoices just before year end then promptly reverse the invoices by issuing credit notes after year end. However smarter auditors have wisened up to this and one other procedure performed by some auditors is to look at credit notes issued after year end to see if they are reversing material sales just before year end.

For me the materiality of the outstanding individual debtors is just so significant that PKF would have to been extremely negligent to have missed anything awry with debtor figure and sales.