FACULTY ECONOMICS AND MANAGEMENT SCIENCES

SCHOOL SCHOOL OF ACCOUNTING

SUBJECT AUDITING 1

SUBJECT CODE CAUA 3690

DATE JUNE 2023

DURATION 90 MINUTES MARKS 50

JUNE TEST MEMO

Examiner: Edwin Dennis Beukes

This question paper consists of 6 pages including the cover page

QUESTION 1 (10 MARKS)

SUB
YOU ARE REQUIRED TO: TOTAL TOTAL
1.1 Discuss query a to c provided above by using the SAICA code of 9
professional conduct. Your answer should be presented in the following
table format:

Query Identify the Fundamental Safeguards to

number threat to the principle which is reduce the
fundamental threatened significance of
principles the threat
a (1 x 1) (1 x 1) (1 x 1)
b (1 x 1) (1 x 1) (1 x 1)
c (1 x 1) (1 x 1) (1 x 1)

Communication mark – presentation and layout (table format)

1 10

1
 TOTAL MARKS FOR QUESTION 1 10

Question 1

Q Identify the threat A Fundamental A Safeguards to be applied A M

to fundamental Principle Threatened
principles
1a Self-interest threat 1 Professional 1 Make clients aware of the 1 1
competence and due terms of the engagement,
care or and in particular, the basis
Independence or on which the fees are
Objectivity charged and the services to
which fees relate; and

Assign appropriate time

and qualified staff to the
task. 1

All applicable standards

and quality control reviews
are being complied with 1

1b Self-interest threat 1 Objectivity or 1 Do not accept the VIP 1 1

or Familiarity threat Independence access cards (not trivial)
1c Self-review threat 1 Confidentiality or 1 The firm should have 1 2
or Independence or policies and procedures in
Familiarity threat Objectivity place which requires that
Mike notify them when
entering into serious
employment negotiations

Review the work of Mike

by a person who is not a
member of the audit team 1
and who is
independent/Quality
reviewer

Remove Mike from the

audit engagement
1

Maximum Maximum 10

QUESTION 2 (20 MARKS)

SUB
YOU ARE REQUIRED TO: TOTAL TOTAL

2
 2.1 IDENTIFY the weaknesses in the above system. 20 x 1 20

TOTAL MARKS FOR QUESTION 2 20

QUESTION 2 - Weaknesses identified in the sales/revenue cycle (EXTREVENTURE)

(Remember that weaknesses are controls that isn’t in place (missing / doesn’t exist) or controls that
doesn’t happen according to the control activities that should be in place – negative!! “no”, “not” =
NOT “should” / “must” / etc.)

ORDER DEPARTMENT
1 Sales clerk / representatives does not sign ISO after order has been taken 1
2 No Internal sales order (ISO ) is sent to the invoicing department (it is only sent to 1
the order- & WH depart)
3 Sales clerk / representatives does not reconcile the ISO's with the delivery notes 1
4 ISO is completed in duplicate and not 4 copies 1
AUTHORISATION OF CREDIT DEPARTMENT 1
5 Credit controller does not review credit terms of existing debtors to follow up on 1
debtors who exceed their credit terms
6 Credit authorisation is given via telephone and not in writing 1
7 New customers does not complete a credit application form or provide trade 1
references to follow up
8 No credit limit is set for new customers according to their creditworthiness 1
9 No formal credit granting policy is in place 1
10 No monthly statements is sent to debtors 1
WAREHOUSE AND DESPATCH DEPARTMENT
11 Mr Thobias (picker) does not initial or sign picking slips for items picked 1
12 There are no supervision to ensure all goods picked are supported by signed picking 1
slips
13 Store clerk (Mr Thobias) does not check goods against PS, and mate DN to PS and 1
file doc
14 DN is made out in duplicate and not in 5 copies 1
15 No copy of signed DN is sent to the invoicing department 1
16 Mr Pienaar (dispatch / delivery clerk) does not check goods (quantity / description) 1
to picking slip and DN
17 Mr Pienaar does not sign PS & DN to acknowledge the receipt of goods 1
18 Mr Pienaar / Snr personnel does not supervise the loading of the goods 1
19 There are no gate control, where the security guard compare the goods with the 1
delivery notes and date stamp delivery notes as proof of check. Side gate is not used
for gate control, but the main gate.
20 Customer does not sign the delivery notes as proof of receipt of goods 1
INVOICING
21 Invoice is made out, without delivery of goods being confirmed or checked against 1
the DN
22 No sequence check of delivery notes is performed to follow up on missing numbers 1
23 Mr Barnard (invoice clerk) does not compare ISO with DN 1
24 Mr Barnard (invoice clerk) does not sign the invoice as proof of procedures 1
performed
RECORDING
25 Mr Steyn (assistant financial manager) does not sequence check sales journal entries 1
and follow up on missing invoices

3
 26 Mr Steyn (assistant financial manager) does not reconcile the debtors list to debtors 1
control account
27 No senior employer review debtors reconciliation 1
28 No segregation of duties Mrs Kromhout performs sales authorisation, completes 1
sales invoice and is responsible for debtors journal
29 No segregation of duties as Mr Steyn records inventory transactions and pass 1
journal entries
30 Overall poor control environment as no independent reconciliations & checks are 1
done by snr management
TOTAL MARKS AVAILABLE 30
MAX MARKS 20

QUESTION 3 (11 MARKS)

SUB
YOU ARE REQUIRED TO: TOTAL TOTAL
3.1 IDENTIFY and EXPLAIN any weaknesses in the receiving of goods
function of Burger Queen, by only referring to the information provided
by the goods receiving clerk above.

Your answer should be presented in the following table format:

Weakness (5 marks) Explanation (5 marks)

2x5 10
TOTAL MARKS FOR QUESTION 3 10

Weakness Explanation
The receiving clerk did not check the 1 Acceptance of short deliveries as full 1
quantity of goods delivered against the deliveries OR
PO and the supplier DN. Acceptance of items not ordered OR
Acceptance of goods not of the required
type or quality
The receiving clerk did not perform a 1 Acceptance of damaged and broken 1
superficial test on the condition of the items.
goods
delivered OR
the receiving clerk did not check for
broken or wet boxes.
The receiving clerk did not identify any 1 Goods received notes (GRN’s) may not 1
rejections of goods on both copies of be made out accurately or completely
the DN and PO. OR
Theft by employees or outside parties,
e.g. collusion with supplier delivery
personnel.
The goods received note (GRN) is not 1 Difficulty to trace documents if 1
sequentially numbered. problems arise OR
The records could be incomplete due to
missing documents not being
discovered.

4
 The warehouse clerk did not sign the 1 Theft by employees or outside parties, 1
GRN as proof that goods were received. e.g. collusion with supplier delivery
personnel
Marks 5 Marks 5

COMMUNICATION MARK – presented in 1

table format above
TOTAL MARKS 11

QUESTION 4 (10 MARKS)

SUB
YOU ARE REQUIRED TO: TOTAL TOTAL
4.1 Identify three (3) weaknesses, together with the relevant risks, in
the “personnel (HR)” function of Frozen Delicious, by only using the 3x1
information provided above. 3x1
For each weakness identified, also provide the necessary
recommendation that will improve their payroll and personnel 3x1
function.
Your answer must be presented in the following format:
Weakness Risk Recommendation
Communication mark – presentation and layout (table format) 2 x 0,5 10
TOTAL MARKS FOR QUESTION 4 10 10

Identify weakness Possible risk Recommendation

Request for appointments or
dismissal of employees does
not originate from the
section head OR
Requests for any
appointments or dismissals
of employees are informally
decided upon by Mr Ice and
not the section.
Recruiting / retaining
unsatisfactory employees
OR
Recruiting / retaining
unnecessary employees
OR
Incorrect dismissal
procedures OR
Request for
appointments or
dismissal of employees
should originate from the
section making the
request e.g. different
frozen yogurt trailers
across the Cape Town
beaches.

Unauthorised
amendments to (1)
employee records -
(1) fictitious additions (1)
Request for appointments or (1) Inaccurate or incomplete (1) Request for
dismissal of employees is not records OR appointments or
in writing. dismissal of employees
OR Incorrect dismissal should be in writing and
procedures OR include a motivation to
Appointments or dismissals ensure records are
are verbally communicated Unauthorised complete.
by Mr Ice to the relevant amendments to

5
section head and section
manager and not in writing
(formally)
The request is not
authorised / signed by the
relevant section head and
manager
Warning letters is not
properly filed in the
employee file OR
Warning letters are sent to
Mr Ice who keeps it neatly
stacked on his desk and does
not file it properly.
Available marks
Maximum marks
employee records -
fictitious additions
Recruiting / retaining
unsatisfactory employees
OR
Recruiting / retaining
unnecessary employees
OR
Incorrect dismissal
procedures OR
Unauthorised
amendments to
employee records -
(1) fictitious additions (1)
Inaccurate or incomplete
records. OR
Incorrect dismissal
procedures.
(1) (1)
4 Available marks 4
3 Maximum marks 3 Maximum marks
COMMUNICATION MARK – presented in format above (1)
***END OF PAPER***
(1)
Request is should be
signed by the section
head and countersigned
by the section manager
to ensure valid control
activities are performed.
(1)
A file should be kept for
each employee which
should include
disciplinary warnings
(warning letters),
personal information, etc.
(1)
Available marks 4
3
Maximum marks 10
TOTAL: 50