ASSIGNMENT 2 DUE DATE; 07 OCTOBER 2019

Masangomavi Tours (MT)

You have been appointed as the Chief Internal Auditor of Masangomavi Tours (MT) and are about to audit MTs trade receivables balance for 2018.

MT is a company in Zimbabwe that offers tourism services for tourists who want to visit tourist resort areas in the SADCC region. The company has lodges and vehicles in 10 different centres in the region that they hire out to various clients. MT aims to provide its customers with a reliable and competitively priced tourism services, both nationally and internationally. At any-one time MT has approximately 100 large trade receivables balances. Each of these balances can fluctuate between $30 000 to $112 000. At year end, the average large balance is $65 000. The remaining accounts have on average a balance of $2 900. The trade receivables balances have different due dates for payments and credit limits. The trade receivables are maintained alphabetically in a master file of trade receivables.

Tourism Service document data is keyed into a computerised system that simultaneously produces a tourism services invoice, income journal and an updated trade receivables master file.

Customers submit cheques and remittance advices to clear their debt. On opening the post, a member of the accounts staff records the list of cheques. Computer services staff carry-out a comparison of the remittance advices with this listing. After computer services staff enters the cash receipts information, a cash receipts journal and an updated trade receivables master file are simultaneously prepared.

Summary totals are produced on a monthly basis by the computer services department for updating the general ledger master file accounts i.e. cash, income and trade receivables.

Although previous audits of trade receivables have tended to adopt an audit around the computer approach, you have decided to use audit software to assist with the audit of the trade receivables balance.

Required:

(a) List EIGHT specific risks posed by information technology to an entitys internal control. (8)

(b) Explain the concept of auditing around the computer and discuss why this increases audit risk for the auditor. (5)

(c) Explain the SIX audit procedures that could be carried out using audit software on the trade receivables balance at MT. For each procedure, explain the reason for that procedure. (12)

Required:

Briefly explain each of the procedures listed above. [Total 25 marks]