5.4 The computer then prints out a four-part invoice. The top copy remains in the sales department and is filed. The second copy is sent to the accounting department where it is filed. The remaining two copies are handed to the customer who takes them to the "despatch hent" which is a secure area attached to the warehouse. Both copies of the invoice are handed to any one of the five despatch clerks; who picks the items required from the warehouse. Once the items have been picked, the despatch clerk, using an ink stamp, stamps both copies of the invoice "FILLED" and hands one copy of the invoice to the customer with the goods. The customer then loads the goods onto his vehicle and leaves Tapp Tapp (Pty) Ltd's premises. The remaining copy of the invoice is filed in the despatch department. 6.If a contractor does not have an account, the salesman will select the "open new account" module of the accounts receivable software and, following the screen prompts, will enter the contractor's name, trading name, registration number (if applicable), address and bankers. The salesman will request the contractor's identity document and enter the identity number into the computer. Once this has been completed, the contractor is automatically allocated an account number and added to the debtors' masterfile. He can then make whatever purchases requires. (3) YOU ARE REQUIRED TO: a. Explain the internal control objectives of validity, accuracy and completeness in the context of sales in the revenue and receipts cycle. b. Explain the following assertions pertaining to the accounts receivable balance in the year-end financial statements of Tapp Tapp (Pty) Ltd: existence, accuracy, valuation and allocation, completeness and classification. (5) c. Identify the two assertions pertaining to the audit of accounts receivable which, under normal circumstances, are likely to attract a greater risk of material misstatement. Give brief reasons d. Identify and explain the weaknesses in internal control in the aspects of Tapp Tapp Ltd's revenue and receipts cycle which are described in points 1-6 above. Do not concern yourself with backorders. (18) AUDITING 2 ASSIGNMENT 1 QUESTION 1 (30 MARKS) You are a member of the team on the audit of Tapp Tapp (Pty) Ltd, a company which supplies plumbing requisites (baths, basins, pipes, joints, etc) to plumbing contractors You have been assigned to the audit of the revenue and receipts cycle and are in the process of evaluating the accounting system and related internal controls in the cycle. Information pertaining to certain aspects of the cycle appears below. L The company sells only on credit. This reduces the risks arising from having cash on the premises 2. All sales are made from Tapp Tapp (Pty) Ltd's premises which consist of a showroom, warehouse and administrative offices under one roof. 3. Plumbing contractors must visit the company's premises to make purchases as Tapp Tapp (Pty) Ltd does not deliver. This suits the contractors as it means they can make their purchases early in the day (the company's business hours are 7am to 5pm) and collect the goods at the same time. 4. Customers (contractors) are served by any one of six technically trained salesmen who sit behind a long counter in the sales area. Each salesman has his own computer terminal 41 When a contractor arrives at the counter, one of the salesmen will enquire as to the contractor's name and having accessed the create sales invoice" module, will enter the given name, e.g. Watertite Plumbers CC into the computer. This brings up the customer details on screen which is formatted as a sales invoice. The salesman will then confirm the details e.. account number, address etc, with the customer by reading the details the screen to the customer. off 5. The contractor's order is then taken as follows: 5.1 To determine inventory availability and price, the salesman accesses the inventory masterfile. 5.2 If the item is available (which is usual) and the customer is satisfied with the price, the salesman proceeds with taking the order. 53 To complete the invoice, the salesman enters the inventory Item code and quantity of each item required in the relevant fields. This automatically completes the other fields on the invoice e.. description of goods, selling price, VAT, total selling price. The invoice is automatically sequenced by the computer software. Page 10 of 23 5.4 The computer then prints out a four-part invoice. The top copy remains in the sales department and is filed. The second copy is sent to the accounting department where it is filed. The remaining two coples are handed to the customer who takes them to the "despatch department which is a secure area attached to the warehouse, Both copies of the invoice are handed to any one of the five despatch clerks; who picks the items required from the warehouse. Once the items have been picked, the despatch clerk, using an ink stamp, stamps both copies of the invoice "FILLED" and hands one copy of the invoice to the customer with the goods. The customer then loads the goods onto his vehicle and leaves Tapp Tapp (Pty) Ltd's premises. The remaining copy of the invoice is filed in the despatch department. 6.If a contractor does not have an account, the salesman will select the "open new account" module of the accounts receivable software and, following the screen prompts, will enter the contractor's name, trading name, registration number (if applicable), address and bankers. The salesman will request the contractor's identity document and enter the identity number into the computer. Once this has been completed, the contractor is automatically allocated an account number and added to the debtors' masterfile. He can then make whatever purchases requires. he YOU ARE REQUIRED TO: a. Explain the internal control objectives of validity, accuracy and completeness in the context of sales in the revenue and receipts cycle. (3) b. Explain the following assertions pertaining to the accounts receivable balance in the year-end financial statements of Tapp Tapp (Pty) Ltd: existence, accuracy, valuation and allocation, completeness and classification (5) c. Identify the two assertions pertaining to the audit of accounts receivable which, under normal circumstances, are likely to attract a greater risk of material misstatement. Give brief reasons (4) d. Identify and explain the weaknesses in internal control in the aspects of Tapp Tapp Ltd's revenue and receipts cycle which are described in points 1- 6 above. Do not concern yourself with backorders. (18) 5.4 The computer then prints out a four-part invoice. The top copy remains in the sales department and is filed. The second copy is sent to the accounting department where it is filed. The remaining two copies are handed to the customer who takes them to the "despatch hent" which is a secure area attached to the warehouse. Both copies of the invoice are handed to any one of the five despatch clerks; who picks the items required from the warehouse. Once the items have been picked, the despatch clerk, using an ink stamp, stamps both copies of the invoice "FILLED" and hands one copy of the invoice to the customer with the goods. The customer then loads the goods onto his vehicle and leaves Tapp Tapp (Pty) Ltd's premises. The remaining copy of the invoice is filed in the despatch department. 6.If a contractor does not have an account, the salesman will select the "open new account" module of the accounts receivable software and, following the screen prompts, will enter the contractor's name, trading name, registration number (if applicable), address and bankers. The salesman will request the contractor's identity document and enter the identity number into the computer. Once this has been completed, the contractor is automatically allocated an account number and added to the debtors' masterfile. He can then make whatever purchases requires. (3) YOU ARE REQUIRED TO: a. Explain the internal control objectives of validity, accuracy and completeness in the context of sales in the revenue and receipts cycle. b. Explain the following assertions pertaining to the accounts receivable balance in the year-end financial statements of Tapp Tapp (Pty) Ltd: existence, accuracy, valuation and allocation, completeness and classification. (5) c. Identify the two assertions pertaining to the audit of accounts receivable which, under normal circumstances, are likely to attract a greater risk of material misstatement. Give brief reasons d. Identify and explain the weaknesses in internal control in the aspects of Tapp Tapp Ltd's revenue and receipts cycle which are described in points 1-6 above. Do not concern yourself with backorders. (18) AUDITING 2 ASSIGNMENT 1 QUESTION 1 (30 MARKS) You are a member of the team on the audit of Tapp Tapp (Pty) Ltd, a company which supplies plumbing requisites (baths, basins, pipes, joints, etc) to plumbing contractors You have been assigned to the audit of the revenue and receipts cycle and are in the process of evaluating the accounting system and related internal controls in the cycle. Information pertaining to certain aspects of the cycle appears below. L The company sells only on credit. This reduces the risks arising from having cash on the premises 2. All sales are made from Tapp Tapp (Pty) Ltd's premises which consist of a showroom, warehouse and administrative offices under one roof. 3. Plumbing contractors must visit the company's premises to make purchases as Tapp Tapp (Pty) Ltd does not deliver. This suits the contractors as it means they can make their purchases early in the day (the company's business hours are 7am to 5pm) and collect the goods at the same time. 4. Customers (contractors) are served by any one of six technically trained salesmen who sit behind a long counter in the sales area. Each salesman has his own computer terminal 41 When a contractor arrives at the counter, one of the salesmen will enquire as to the contractor's name and having accessed the create sales invoice" module, will enter the given name, e.g. Watertite Plumbers CC into the computer. This brings up the customer details on screen which is formatted as a sales invoice. The salesman will then confirm the details e.. account number, address etc, with the customer by reading the details the screen to the customer. off 5. The contractor's order is then taken as follows: 5.1 To determine inventory availability and price, the salesman accesses the inventory masterfile. 5.2 If the item is available (which is usual) and the customer is satisfied with the price, the salesman proceeds with taking the order. 53 To complete the invoice, the salesman enters the inventory Item code and quantity of each item required in the relevant fields. This automatically completes the other fields on the invoice e.. description of goods, selling price, VAT, total selling price. The invoice is automatically sequenced by the computer software. Page 10 of 23 5.4 The computer then prints out a four-part invoice. The top copy remains in the sales department and is filed. The second copy is sent to the accounting department where it is filed. The remaining two coples are handed to the customer who takes them to the "despatch department which is a secure area attached to the warehouse, Both copies of the invoice are handed to any one of the five despatch clerks; who picks the items required from the warehouse. Once the items have been picked, the despatch clerk, using an ink stamp, stamps both copies of the invoice "FILLED" and hands one copy of the invoice to the customer with the goods. The customer then loads the goods onto his vehicle and leaves Tapp Tapp (Pty) Ltd's premises. The remaining copy of the invoice is filed in the despatch department. 6.If a contractor does not have an account, the salesman will select the "open new account" module of the accounts receivable software and, following the screen prompts, will enter the contractor's name, trading name, registration number (if applicable), address and bankers. The salesman will request the contractor's identity document and enter the identity number into the computer. Once this has been completed, the contractor is automatically allocated an account number and added to the debtors' masterfile. He can then make whatever purchases requires. he YOU ARE REQUIRED TO: a. Explain the internal control objectives of validity, accuracy and completeness in the context of sales in the revenue and receipts cycle. (3) b. Explain the following assertions pertaining to the accounts receivable balance in the year-end financial statements of Tapp Tapp (Pty) Ltd: existence, accuracy, valuation and allocation, completeness and classification (5) c. Identify the two assertions pertaining to the audit of accounts receivable which, under normal circumstances, are likely to attract a greater risk of material misstatement. Give brief reasons (4) d. Identify and explain the weaknesses in internal control in the aspects of Tapp Tapp Ltd's revenue and receipts cycle which are described in points 1- 6 above. Do not concern yourself with backorders. (18)