Gold Galore Sport Goods (Pty) Ltd Gold Galore Sporting Goods (Pty) Ltd (hereafter referred to as (GGSG) is a manufacturer of various types of high-quality sporting equipment. It was started by the current chief executive officer (CEO), Mr Ball, in 2015. Raw materials, such as leather, butyl, latex and the like, are imported from various parts of the world, then reworked, coloured and prepared for the various sporting equipment. After the COVID-19 pandemic, GGSG has seen an increase in demand for their products. To enhance service, GGSG has implemented an integrated system linking the sales, purchases and inventory cycles. ABC Auditors Inc has been contracted to assist GGSG to update and enhance the various business processes. As a second-year audit trainee of ABC Auditors Inc, you have been asked to assist GGSG with this process, as well as answering any questions they may have. ACQUISITIONS AND PAYMENTS Receiving of goods Upon receipt of goods the following procedures are followed to receive and record the goods ordered: The first person on hand, normally a factory worker, receives the goods and takes responsibility thereof. The employee first inspects and counts the goods. If the goods are broken, or seems to be tampered with, he rejects the goods and indicates it as such on the supplier delivery note. Goods are then moved to various sections within the warehouse. At the end of the day, the receiving clerk or the factory foreman opens the receiving module to record the goods received for that day. This module is only available on the one computer in the office at the back of the warehouse. Recording of the goods received Mr Ball has heard of screen aids and programme checks and wants to incorporate them in the receiving module when recording the goods received. Terms that he has heard include minimum entry, mandatory field checks and alphanumeric checks. INVENTORY CYCLE GGSG does an annual inventory count on the last day of the financial year-end to determine the inventory on hand. This is used in the calculation of the final inventory balance at year-end to be included in the financial statements. Below is an example of the inventory count sheet used by GGSG during their year-end count: SSGS INVENTORY COUNT SHEET Department: Counter 1: Sheet no.: 5 Counter 2: Item # Description Quantity count 1 Quantity count 2 Discrepancies/ Comments 14332 Rugby ball size 3 (mini) 14333 Rugby ball size 4 (junior) 14334 Rugby ball size 4.5 (womens) 14335 Rugby ball size 5 (men) 14447 Hockey stick (shortis) 14448 Hockey stick (midis) 14450 Hockey stick (maxis) 14451 Hockey stick (hooks) 14507 Soccer ball (butyl) 14508 Soccer ball (latex) 14525 Netball size 4 (kids) 14526 Netball size 5 (adult) Counter 1: Date: Counter 2: Below is the calculation used to determine the inventory balance to be included in the financial statements for the year ending 31 July 2022: R Inventory on hand as at year-end 1 950 000 Import duties on materials (excl VAT) 150 000 VAT on import duties 22 500 Transport cost of materials to warehouse 100 000 VAT on transport cost (imports) 15 000 Transport cost of finished product to retailers 60 000 VAT on transport cost (sales) 9 000 Advertising cost 12 000 VAT on advertising cost 1 800 Factory overheads 72 900 Wages of factory workers (direct labour) 2 900 000 Salaries of the accounts department personnel 620 000 TOTAL 5 913 200 PAYROLL AND PERSONNEL Most employees of GGSG are paid salaries monthly. However, the factory employees are paid wages every two weeks. The majority of these employees do not have bank accounts and are paid out in cash. Ethical situation Mr Z Mbatho, one of the factory workers, approached the wage clerk, Ms K Similane to ask for help. He informed Ms Similane that his son had been sick for a while and that he was struggling to keep up with the medical bills. Ms Similane told Mr Mbatho not to worry and that she would come up with a plan to assist him. They decided upon the following course of action. Ms Similane would increase the hours worked by Mr Mbatho on payroll as paid overtime for the next six weeks. Thereby assisting Mr Mbatho to cover his medical bills. Ms Similane would then reduce the hours worked as and when Mr Mbatho was financially steady and able to pay back the money. Mr Mbatho gladly agreed to this and thanked Ms Similane for assisting him. Ms Similane reminded Mr Mbatho not to tell anyone about this arrangement as they could get into serious trouble. REQUIRED WITH REFERENCE TO THE ACQUISITIONS AND PAYMENTS SECTION: 1. Identify and explain any eight (8) weaknesses in the receiving of goods process of Gold Galore Sporting Goods (Pty) Ltd. (12) 2. Explain each of the screen aids and program checks mentioned AND provide an example for each relevant to the recording of goods received function within the acquisitions and payments cycle: a. Minimum entry (3) b. Mandatory fields (3) c. Alphanumeric checks (3) WITH REFERENCE TO THE INVENTORY SECTION: 3. Identify six (6) ways the inventory count sheet was prepared according to good internal controls. (9) 4. Some of the line items of the inventory balance are incorrectly included. Calculate the revised inventory balance according to the prescriptions of International Accounting Standards 2: Inventories. (8) Communication skills (1) WITH REFERENCE TO THE PAYROLL AND PERSONNEL SECTION: 5. Provide four (4) major differences between salaries and wages. (6) 6. In your opinion, did Mr Mbatho and Ms Similane act ethically? Discuss why you reached this conclusion. (4)