Sakrekenaars/Calculators: Ja/Yes

Benodigdhede vir hierdie vraestel/Requirements for this paper: Ander hulpmiddels/Other resources:
Antwoordskrifte/ Multikeusekaarte (A5)/
X
Answer scripts: Multi-choice cards (A5):

Presensiestrokies (Invulvraestel)/ Multikeusekaarte (A4)/

X
Attendance slips (Fill-in paper): Multi-choice cards (A4):

Rofwerkpapier/ Grafiekpapier/
Scrap paper: Graph paper:
c
Tipe Assessering/ Test 3 Kwalifikasie/ B Com Chartered &
Type of Assessment: Qualification: Forensic
Accountancy
Modulekode/ GEAR371 Tydsduur/ 90 minutes
Module code: Duration:
Module beskrywing/ Auditing Maks/ 50 marks
Module description: Max:
Eksaminator(e)/ Mr R M Brink Datum/Date: 31 August 2022
Examiner(s): Ms M du Plessis Tyd/Time: 9:00
Internal/Interne Prof A Nel
moderator(s):

Instructions

1. You are reminded that answers may NOT be written in pencil or erasable pen.
2. The marks shown against the requirement(s) for each question should be taken as an indication of the
expected length and the required depth of the answer.
3. Answer the questions using:
 Appropriate arrangement and presentation;
 Clarity of explanation;
 Logical argument; and
 Clear and concise language.
Marks will be awarded for the above.

4. Non-programmable calculators are allowed.

5. Prescribed technical books may be used.
6. All books must be handed in.
7. This paper is subject to the approved NWU open-book policy and the following are highlighted:
 You are allowed to highlight, underline, side-line and flag permitted texts.
 You may NOT make any notes anywhere in the prescribed texts.
 You MAY NOT supplement texts with ANY loose papers (whether or not affixed to the permitted
texts).
8. Clearly show all calculations.
9. Assume that all amounts are material except where the contrary is stated.
10. Your answer must adhere to the provisions of ISA.
11. Reading time of 15 minutes is allowed and thereafter writing will commence for the remainder of time.

GEAR371: Class test 3 1/8

QUESTION 1 50 MARKS
Background information
You are an audit manager at Serious & Young Incorporated (hereafter “SY”). SY is a medium sized
audit firm which has branches in all major cities throughout South Africa. SY provides auditing,
taxation, and advisory services. SY is currently tendering to provide auditing services to Mrs Price
Clothing Stores Limited (hereafter “Price”) for the financial year ending 31 December 2022.

Price began in Durban South Africa where one idea by two visionaries quickly grew to multiple
stores around the country. Fast forward more than twenty years later and Price is now providing
fashionable clothing across ladies, men and kids lines at unbelievable prices to stores across
Africa and worldwide through Mrs-Price-app (hereafter “app”). Price worked very hard, since 2015
when their online shopping journey began, to bring to customers the most convenient way to shop
“hot” fashion from the tips of their fingers. Although, the Covid-19 pandemic severely impacted
sales at Price as lockdown regulations restricted sales from all stores not providing essential
goods, the app reaped the necessary rewards post Covid as customers felt much more inclined to
use the app as they perceived it as a safer way to shop. The app makes shopping much easier as
customers can now shop in one convenient place, where the app provides a visual search option
and a super safe contactless scan to pay option. Not only does the digital receipt save kilometres
of paper each year, but utilising the app, as opposed to visiting the physical store, also saves the
customers essential time which could be utilised for other more important things. Price’s
warehouses that are situated across Africa are fully stocked and their latest product offerings
include beauty products, school gear baby wear, as well as technological gadgets.

Pride utilizes a comprehensive computerised accounting system for all their reporting
requirements. SY’s auditing software is compatible with Price’s system.

The following documents and working papers are available to you:

Reference Description

Email: 1 Results of the year-end inventory count of Mrs Price Clothing Stores
Limited

Working paper M1 Overview of Debtors

Working paper N1 Overview of Creditors

To: Auditpartner@Serious&Young.co.za
EMAIL:1
From: Auditmanager@Serious&Young.co.za
Date: 08/01/2023
Subject: Results of the year-end inventory count of Price

GEAR371: Class test 3 2/8

 Good day Mr Audit partner

I am glad to announce that the year-end inventory count was a success! There were a few
hiccups here and there, but all in all it went well.

As requested, please find the feedback pertaining to the inventory count that was done.

Prior to the count

The audit team was informed of the date, time, and location of the inventory count. The inventory
controller phoned me before the count, where he confirmed all locations where inventory is kept
and gave me a quick update of key matters addressed in the inventory count instructions. To
streamline the communication between all members of the audit team allocated to the inventory
count, we all agreed to create a Chatsup group. On the morning of the inventory count I
personally provided a message on the Chatsup group the responsibilities of each audit staff
member allocated to the inventory count of Price.

During the count

After picking up my morning cappuccino, I walked through Price’s warehouse where the count
was taking place and was impressed at how fast the counting team of Price was counting and
sticking the inventory tags on all inventory counted – they clearly knew what they were doing. It
was easy for me to identify everything that was counted by just checking the inventory tags
sticked on every item counted and additionally I observed that no movement were taking place.
Thereafter, the audit team allocated to the count, also performed some test counts to ensure that
at least some of the physical inventory agrees with the inventory count sheets. If we identified
any discrepancies, it was resolved by recounting it with the counters of Price and making the
necessary adjustments to the inventory count sheets.

The count team and I made good progress by finishing the inventory count before 13:00. I
decided to reward the audit team that assisted with the inventory count with a meal at a local
restaurant, using the company card of course. While at the restaurant I remembered that I
should have confirmed how many inventory count sheets were issued to Price’s counters and
how many were handed back at the end of the count to Price’s inventory controller. Luckily, I
remembered that I did count them with the inventory controller of Price, before the inventory
count was conducted, so that shouldn’t be an issue.

Conclusion of the count

After we got back from the restaurant, I inspected all the inventory count sheets returned to
make sure they were signed by the counters of Price responsible for the inventory count. I did
notice a few alterations on the inventory count sheets and were happy that the counters did a
proper job. I then created audit records by making copies of all the inventory count sheets,
recording observations of Price’s inventory count procedures, and lastly, I obtained a list of
goods received notes unmatched to the supplier invoices.

Let me know if you have any questions.

Greetings

Mr S Doubt (Audit manager in charge of inventory count at Mrs Price Clothing Stores Limited)

Client: Mrs Price Clothing Stores Limited Year-end: 31 December 2022

M1
Prepared by: Second year trainee accountant Date: 16 January 2023
1 of 2
Reviewed by: B Peckish Date: 22 January 2023

GEAR371: Class test 3 3/8

 Subject: Overview of Debtors

1. Overview of Debtors
Price sells goods on credit and cash to the public. All debtors buying on credit must complete a
credit application form before they can purchase goods on credit. The credit terms are 30 days
from the invoice date.
If Price’s debtors’ list and debtors control account contain reconciling items, a monthly
reconciliation is performed by the credit controller to identify the reason for the differences.
Thereafter, the Chief Financial Officer (CFO), Mrs Right, reviews the reconciliation to ensure it is
done correctly and signs if off as proof of authorisation.
2. Debtors’ Masterfile
The credit controller has indicated that a text file, can be extracted from the debtor’s
masterfile, to assist with the audit of debtors.
An example of the fields contained in the debtors’ Masterfile are as follows:

Field Example

Account Number 12425206

Name Corporate Clothing (Pty) Ltd.

Address P.O. Box 2145, Vereeniging, Gauteng, South

Africa, 2001

Total amount owed R225 625

Credit limit R300 000

Credit terms 30 days

Discount percentage (%) if paid within 30 2.5%

days

Ageing of total amount owed 30 days, 60 days, 90 and over

Status of account Letter “h” – if handed over to the attorneys for

collection

3. Allowance for credit losses

An allowance for credit losses is made by Price, using the following criteria:
 60 days and over – 10%

Client: Mrs Price Clothing Stores Limited Year-end: 31 December 2022

M1
Prepared by: First year trainee accountant Date: 16 January 2023

GEAR371: Class test 3 4/8

 Reviewed by: B Peckish Date: 22 January 2023 2 of 2
Subject: Overview of Debtors

4. Audit procedures already performed

 By using CAATs, casted individual balances on the debtors list and compared it to the
debtors’ control account
 Scrutinised the debtors control account in the general ledger for any unusual entries e.g.
credit balances
 Performed necessary audit procedures on any reconciliation items identified during the
debtors’ reconciliation
 Reviewed and followed up on the debtors’ circulation responses obtained for evidence of
debtor valuation problems e.g., debtors arguing that they have been charged twice
 By using CAATs, re-performed the debtors’ age analysis, by selecting a sample of debtors
from the debtors’ masterfile and tracing it back to supporting documentation (e.g. delivery
notes) to determine that amounts owed have been allocated to the correct time period in the
age-analysis
 Inspected debtors’ correspondence and legal files to identify debtors who have been handed
over to attorneys for collection
 Enquired from management about any specific factors e.g. relaxing of credit terms, which
may affect the allowance for credit losses

Client: Mrs Price Clothing Stores Limited Year-end: 31 December 2022

N1
Prepared by: First year trainee accountant Date: 10 February 2023
1 of 2
Reviewed by: V Clever Date: 22 February 2023
Subject: Overview of Creditors

1. Creditor’s reconciliation
Twenty-five (25) creditors were selected from the creditors’ list on which to perform audit
procedures to obtain audit evidence regarding the accuracy, valuation, and allocation of
creditors.
The following creditor’s reconciliation pertaining to Funcky Clothing (Pty) Ltd (hereafter
“Funcky Clothing”) was selected as part of the sample:
Note R
Balance as per Funcky Clothing’s statement dated 31 December 1 425 094
2022
Less:
Electronic Fund Transfer (EFT) made on 31 December 2022, not 1 (85 000)
yet reflected
Delivery of goods pre-invoiced 2 (152 800)
Add:

GEAR371: Class test 3 5/8

 Vat error on invoice 190 3 (1 500)
Balance as per creditor’s ledger as at 31 December 2022 1 185 794

Note 1
The amount of R85 000 was directly deposited into Funcky Clothing’s bank account via an
Electronic Funds Transfer (EFT) on 31 December 2022 but doesn’t show on the 31 December
2022 creditors’ statement.
Note 2
The goods valued at R152 800 was delivered by Funcky Clothing on 1 January 2023, where
ownership was taken by Price’s goods receiving clerk when he signed the Goods received note
(GRN150). The invoice (INV198) for R152 800 was made out on 31 December 2022 to which
GRN150 relates to does however already appear on the 31 December 2022 creditors’
statement.
Note 3
This overcharge resulted from Funcky Clothing including the total invoiced amount including
VAT for invoice (INV190). The invoice amount excluding VAT was R10 000 and was made out to
Price on 23 December 2022.

GEAR371: Class test 3 6/8

 Client: Mrs Price Clothing Stores Limited Year-end: 31 December 2022
N1
Prepared by: First year trainee accountant Date: 10 February 2023
2 of 2
Reviewed by: V Clever Date: 22 February 2023
Subject: Creditors

2. Further audit procedures on creditors

As you were busy auditing the creditor’s accounts of Funcky Clothing you obtained important
supporting documentation from the accountant to assist you further with the auditing of creditors.
(Refer to Annexure A: Supporting documentation):

Annexure A: Supporting documentation

List of creditors as at 31 December 2022

Account Creditor name 2022 2021
number R R
SUP00024 Happy Logistics Ltd 1 842 727 1 419 853
SUP00089 Redfox Supplier Ltd 328 752 1 175 289
SUP00095 Proton Logistics (Pty) Ltd 1 937 573 1 274 526
SUP00061 Supplier Harbour Ltd 1 874 896 1 481 744
SUP00048 Logistics Fever (Pty) Ltd - 1 147 109
5 983 948 6 498 521

List of unmatched goods received notes (GRNs) unmatched to supplier

invoices as at 31 December 2022
GRN Creditor name Date 2022
number R
GRN00881 Happy Logistics Ltd 31/12/2022 56 478
GRN00882 Redfox Supplier Ltd 31/12/2022 38 528
GRN00883 Supplier Harbour Ltd 31/12/2022 79 251
174 257

GEAR371: Class test 3 7/8

 SUB-
QUESTION 1 – REQUIRED
TOTAL TOTAL
1.1 With specific reference to E-mail 1:

Discuss any concerns evident in the audit procedures documented 11 x 1

and performed by the audit team of Serious & Young Incorporated
prior, during and at the conclusion of the inventory count of Mrs
Price Clothing Stores Limited at year-end.
Communication skills: Clarity of expression 1x1 12
1.2 Describe three (3) substantive audit procedures that you will
perform, to obtain audit evidence for the rights assertion of 3x1
inventory for the 2022 year-end. 3
1.3 With specific reference to working paper M1 - Overview of
Debtors:

Describe the additional substantive audit procedures, including 15 x 1

CAATs (Computer assisted audit techniques), that you will perform,
to obtain audit evidence for the accuracy, valuation and allocation
assertion of debtors for the 2022 year-end. 15
1.4 With reference to working paper N1 - Overview of Creditors: - 1. 14 x 1 15
Creditors reconciliation

Describe the substantive audit procedures that you will perform on

the creditor’s reconciliation of Funcky Clothing (Proprietary) Limited
for the 2022 year-end.
1.5 With reference to Working paper – N1 – Overview of Creditors – 5x1 5
2. Further audit procedures on creditors and Annexure A:

Formulate the detail substantive audit procedures that you would

perform on Mrs Price Clothing Stores Limited’s list of creditors and
list of unmatched goods received notes to supplier invoices to obtain
audit evidence for the completeness assertion of creditors for the 31
December 2022 year-end.

Note: Please provide examples relevant to the information

provided under annexure A, where possible.
TOTAL MARKS FOR QUESTION 1 50 50

GEAR371: Class test 3 8/8