been nominated for best designer awards in Italy for the past 5 years. Tinotenda sources the highest quality of materials from Russia and Italy. She exports the handbags to countries all over Europe and America. 80 percent of all sales are international. Tinotenda also has stores in Sandton (Johannesburg) and Umhlanga Ridge (Durban). The handbags are all handmade at a factory located in Grahamstown.

Pundit Global Consulting has been appointed as the auditor by Tinotenda who is the sole shareholder of Tinotenda Shannon (Pty) Ltd for the 2020 financial year is. You are currently the Senior Manager on the audit.

The following is a working paper that has been extracted from CaseWare Working Papers (The audit software you use).

System notes and walkthrough Planning procedures

Revenue and Receipts (10.80) Client: Tinotenda Shannon (Pty) Ltd Year-end: 31 March 2020

Performed by: Reviewed by:

A S P N

05/04/2020 08/04/2020

Relevant employees referred to and their positions:

Miss Pettinah - Order Clerk

Denzel - Warehousing assistant

Philip -Truck driver

Jason Cooper - Dispatch assistant

Department : (Ordering function)

A customer makes a call when they wish to place an order. The order clerk, Miss Pettinah, asks the customer for their first name and surname. She enters it into the system and reads the customer number out loud for the customer to confirm if this

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ANNEXURE G: SAMPLE FORMATIVE ASSESSMENT 1

is indeed his/her number.

After the customer confirms, the ordering process can continue. Pettinah then asks the customer if they have not exceeded their credit terms and if the customer confirms, she will take the order.

All orders are recorded on blue bound papers that are placed in a file. Signing the internal sales orders (the bound papers) are not done as Pettinah believes that her handwriting is unique.

After 6 months, the bound papers are searched through to identify orders which have not been acted upon.

The internal sales order (ISO) is ticked by the clerk before being sent to the warehouse.

In cases where there is a prospective customer (without a customer number), the prospective customer can place an order, but is informed to register/apply for authorisation as a customer within 10 business days.

Department: (Warehousing and Dispatch)

After Pettinah ticks the bound paper (ISO), it is sent to the warehouse where Denzel picks the handbags.

If any items are not in stock, he always informs Pettinah.

Denzel performs another check on what he has picked and initials the ISO as evidence that he reviewed it.

Denzel always checks the goods he has picked and agrees them to what he remembers seeing on the ISO.

Denzel prepares a delivery note which is numbered by him.

The ISO and delivery note are sent to despatch and Jason Cooper will check the quantities and description of the ISO to the delivery note.

Denzel ticks the delivery note and ISO to acknowledge receipt of goods. The boxes are carried by the driver from the warehouse to the despatch area where the driver then creates a delivery list from what he can see on the boxes. He informs Denzel on how many boxes he saw, and Denzel agrees by signing the list created by the driver.

At the gate, before the truck leaves, security checks if Philip, the truck driver, is the

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ANNEXURE G: SAMPLE FORMATIVE ASSESSMENT 1

one driving the vehicle.

When goods are delivered in South Africa, only the customer signs the original delivery note, but when international couriers are used, the customer is called after a week to check if they received the order.

Department: (Accounting)

The file containing matched copies of the original ISOs and delivery notes is taken to the accounting department. Every Friday, the accountant asks Pettinah and Denzel if there are any deliveries that are not yet complete. The accountant bills the customers after 2 weeks from the date that the ISO was prepared as this is considered a reasonable time for the delivery to be completed.

The accountant always reviews their own work and signs the invoice as evidence that this has been performed. Invoices are entered into the sales journal in order of the date of sale. On a monthly basis, the accountant tests the journals for reasonability.

The system relating to bank and cash (for collections purposes) is working appropriately.

The following information was provided by the financial accountant, as it was part of the documentation you requested.

Debtors age analysis as at 31 March 2020

60 + days

30-60 days

0-30 days

Current

Total

LA Boutique USA

AB Ireland

Total

4 500 000 -

- 200 000 - -

1 200 000 100 000

5 900 000 100 000

6 000 000

A provision for bad debt allowance of R 178 000 was raised.

The draft annual financial statements showed a revenue figure of R7 200 000 for 2020, which relates to local sales only from two stores in South Africa.

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ANNEXURE G: SAMPLE FORMATIVE ASSESSMENT 1

Required:

1.1 Identify the weaknesses in the system description provided and make recommendations on how to improve the weaknesses.

(35 Marks)

Use the following tabular format to present your answer: Weakness Recommendations

1.2 List the audit procedures required to test the foreign debtors of R 6 000 000 as well as the provision for bad debts. Address all assertions

(25 Marks)

1.3 List the data oriented CAATs required to test trade receivables after the computerisation of the cycle.

(15 Marks)

1.4 Discuss the audit procedures required to test the revenue of R7 200 000. Address all assertions.

(20 Marks)