Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

auditing Cleopatra Group manufactures and sells luxury Ceramic flooring they have been trading for more than 50 years and the company's yearend is 31 December

auditing image text in transcribed
Cleopatra Group manufactures and sells luxury Ceramic flooring they have been trading for more than 50 years and the company's yearend is 31 December 2018. Cleopatra sells products to trade customers via its own website; this represents 50% of revenue. Remaining revenue is generated by contracts to supply Ceramic to construction companies. Below is a description of the sales system. The construction companies' revenue is made up of four key customers. Cleopatra has one sales clerk, Ahmed, who maintains all aspects of this revenue stream; Ahmed receives customer orders, raises sales invoices and processes payments. In raising invoices, the sales system automatically inserts the online trade customer prices for products. However, each construction company has contracted prices which are lower than the online prices and hence Ahmed manually edits the invoices prior to despatch. New trade customers are set up in the sales ledger master file upon passing suitable credit checks, and a credit limit is set at this stage by the finance director. Customers place online orders up to their pre-set credit limit; they receive an email confirmation and the sales order interfaces into the despatch system. The order number is linked to the customer account number. Goods are despatched daily with a goods despatched note which is referenced to the sales order number but are not sequentially numbered. Cleopatra used to despatch goods via a reliable national courier company. However, to reduce costs they have changed to a cheaper local courier and some orders have been delivered to customers late. Trade customers' sales invoices are automatically generated by the system on the day the online order is placed. The prices are inserted in accordance with the website rates. Occasionally Cleopatra makes special offers or discounts sales; when this occurs the master file data has to be amended to ensure that the correct prices are used on invoices. This task is usually performed by a senior sales ledger clerk. On a monthly basis statements are sent to the Construction Companies; a number of trade customers have been requesting monthly statements and Cleopatra is considering this request. The company only reconciles the sales ledger control account at the end of December in order to verify the year-end balance. Required: (A) As the external auditor of Cleopatra Group, write a report to management in respect of the sales system described above which identifies and explains SEVEN deficiencies in the sales system, and provides a recommendation to address each of these deficiencies. (B) Describe substantive procedures the auditor should perform to confirm Cleopatra Group's (14 Marks) revenue. (6 Marks) (Total: 20 Marks)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting For Decision Making

Authors: Seohee Park

1st Edition

B08HCQCN2G

More Books

Students also viewed these Accounting questions

Question

3. What are the current trends in computer hardware platforms?

Answered: 1 week ago