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Auditing: You currently working as a Senior Auditor at Alpha Auditors and have been assigned to the audit of Timber (Pty) Ltd (Timber) for the

Auditing:

You currently working as a Senior Auditor at Alpha Auditors and have been assigned to the audit of Timber (Pty) Ltd (Timber) for the financial year ending February 2023.

Timber is a manufacturing and distribution company that is listed on the Johannesburg Stock Exchange (JSE). Timber has been a long-standing client of Alpha Auditors.

The Head Office and manufacturing plant of Timber are situated in Belville, in the Western Cape. Timber has distribution warehouses in Mpumalanga and Gauteng. There is a Branch Manager at every distribution warehouse. Timber is planning to open more distribution warehouses in other provinces in the coming months. Accounting responsibility lies with Head Office and is computerised. The company also has an internal audit department. Each distribution warehouse has its own perpetual inventory record system.

Raw materials and stock count

Due to the fact that Timber closes on 23 December 2022, the Board of Directors decided that a physical stocktake would be held at each distribution warehouse on 15 December 2022 to assess the accuracy of the theoretical inventory figures. If no material differences exist, the theoretical inventory figure will be accepted at financial year-end without further counts being performed.

The Manager of the internal audit department, Mr. Ceasar, was instructed by the Board to provide each Branch Manager with a set of instructions to control the physical stock take. He requested your assistance. Raw materials are purchased from both local and foreign suppliers. Timber engages with foreign exchange contracts to protect itself against adverse foreign currency fluctuations. Inventory from foreign suppliers is purchased free on board.

For 20 marks prepare a list of instructions that can be provided to the Branch Managers to utilise when executing the physical stock count. Refer to the information under the heading raw material and stock count.

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