CASE STUDY Resilience Auditors Incorporated (Resilience) is a small auditing firm that was established by Teboho Nkuhlu in 2018. Teboho is passionate about auditing and wishes to add value to all his clients by providing an excellent audit and non-audit services. Resilience has two engagement partners, three engagement managers and approximately 10 SAICA audit trainees and is situated in Waterfall, Midrand. Resilience's clients are mainly family-owned restaurants, and they don't have any retail clients or clients listed on the JSE.

Clover Ltd (Clover) is a national bookshop with a complex group structure, including subsidiaries in South Africa, Namibia, Zambia and Swaziland. Clover is listed on the JSE and has a 30 June 2023 year-end. Elizabeth Makgoba is the Chief Executive Officer (CEO) of Clover. Elizabeth believes as the CEO, everyone should "just do as I tell them" and often instructs accounting staff to override controls. She sees the King Code of Corporate Governance and the Companies Act as a waste of valuable resources. The previous auditors were removed at the AGM due to disagreements with the CEO, and Resilience was appointed. Teboho and Elizabeth have been friends since primary school. Resilience doesn't currently have a footprint across South Africa, or any clients in a similar industry. They have never audited such a complex group structure, including complex consolidations and related party transactions. Teboho is still confident that Resilience will be able to complete the audit, regardless of Elizabeth's conditions. For Resilience to become the auditors of Clover, Elizabeth said that the following conditions have to be met by Resilience, Resilience may not contact the previous auditor; they have to issue a favourable audit opinion at a premium; they have to sign the engagement letter after the audit is completed and complete the audit by mid-July 2023. Elizabeth explained that these conditions are crucial as Clover is applying for a bank loan due to liquidity issues, exchange rate fluctuations and bad debts.

Clover used only to sell books through their bookshops. Still, as Clover's income decreased drastically during the lockdown, they started trading online and delivering books directly to individual customers, increasing sales again. This was a crucial strategic move as management's bonuses are dependent on sales and not the recoverability of bad debts. In addition to increasedsales, Clover decreased their accounting staff to save costs. Most of the current accounting staff have limited IFRS experience, and due to the autocratic management style, Clover has a high staff turnover. Clover is registered for Value Added Tax (VAT) and their financial statements are compiled in terms of International Financial Reporting Standards (IFRS). Clover doesnt take out forward cover on exchange rate differences for the purchases of inventory.

3. Sales to students If a student wishes to purchase a book at UJB, he / she will select the book and will proceed to the teller for payment. The student will give his / her ID number to the teller. Once the ID number is entered by the teller, the student's name, surname and photo from UBook are displayed on the teller's screen. If the incorrect ID number has been entered, the system will display an error or the incorrect student details. Once the student has been identified, the teller will confirm that the picture on the screen agrees to the student by scanning his / her index finger as authorisation of the sale. Each book has a separate code that the teller will scan, whereafter the teller will input a positive numerical number for the quantity. The system will automatically calculate the total sales value for the goods purchased. The teller will only proceed with a sales transaction if the value of the sale is less than the balance on the student creditor account on UBook. If there are sufficient funds and the student agrees with the total value of the sale, the student will sign on an electronic signature pad on the teller's counter. After the student signed, no changes can be made to the transaction. University of Johannesburg Books (Pty) Ltd (UJB) is the only bookshop at the University of Johannesburg and is located within the Student Centre. 1. Opening of an account If a student would like to purchase any books from UJB, they can apply in-store where the branch manager will assist the student to capture their details on the dedicated iPad that is linked to the UBook accounting system. The student will be required to input his / her name, surname, identification (ID) number, student number, cell phone number, email address and take a photo for identification. As soon as a new contract is opened on UBook, a unique creditor's account is automatically opened. This unique creditor's account is opened at 1cent to ensure funds received can be allocated. 2. Receiving and allocating of Funds All funds loaded onto a student's account are done via EFT and paid into UJB's bank account. This bank account is only used for student deposits. When uploading payment, they must use the student's ID number as a reference as well as the institution where the student is studying. For example, if the money is for a student at UJ, the reference would be 2207220131075UJ. The following documents are applicable to the 30 June 2023 year-end audit of Clover Ltd: \begin{tabular}{|c|l|} \hline WorkpaperReference & \multicolumn{1}{|c|}{ Description of the Workpaper } \\ \hline H300 & Extractoutofsystemdescription:UniversityofJohannesburgBooks(Pty)Ltd \\ \hline \end{tabular} 1. Based on all the information provided under the heading "CASE STUDY", identify and discuss the risks of material misstatement at assertion level for accuracy, valuation and allocation of inventory which the audit team should consider planning the 30 June 2023 year-end audit of Clover Ltd. 2. Based only on the information provided in "WORKPAPER H300" under the heading "3. Sales to students", identify and explain the internal controls applicable to sales to students at the University of Johannesburg Books (Pty) Ltd