AUDITING 2 ASSIGNMENT 1 QUESTION 1 MARS 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 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. 4.1 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.g, account number, address etc, with the customer by reading the details off the screen to customer. the 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. 5.3 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.g. description of goods, selling price, VAT, total selling price. The invoice is automatically sequenced by the computer software. Page 10 of 23 AUDITING 2 ASSIGNMENT 1 QUESTION 1 MARS 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 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. 4.1 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.g, account number, address etc, with the customer by reading the details off the screen to customer. the 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. 5.3 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.g. description of goods, selling price, VAT, total selling price. The invoice is automatically sequenced by the computer software. Page 10 of 23