The following are the observations made from the draft financial statements and their impact on the audit of the Account Receivables:

1. Increase in Turnover:
   • Turnover has increased by 45% from the previous year, which may require verification of the sales transactions. This significant rise necessitates a closer look at the accuracy and completeness of sales records and their corresponding impact on accounts receivable.
2. Increase in Accounts Receivable:
   • Accounts Receivable has increased by 38%, which is slightly less than the increase in turnover. This could indicate efficient collections, but it still warrants a review of the aging of receivables and potential bad debts.
3. Reduction in Receivables Collection Period:
   • The payment period for receivables has reduced from 93 days to 89 days, which suggests improved collections. The audit should verify this by comparing receivables against cash receipts to ensure no unrecorded receipts and to detect any signs of teeming and lading.
4. Gross Profit Margin:
   • The Gross Profit Margin has decreased from 24% to 21%, which might be a result of increased cost of sales. This decline requires further investigation into whether all sales have been appropriately recorded and whether discounts offered are properly accounted for.
5. Reconciliation of Receivables:
   • The increase in both turnover and receivables requires confirmation of year-end balances through customer circularization and reconciliation of customer statements. Additionally, management policies on discounts and their proper recording should be verified.