MAC4867 QUESTION 3 (30 MARKS - 54 MINUTES) PART A - 20 MARKS Picknsave Supermarkets was founded as a grocery retailer in South Africa in 1973. Its sales consist mainly of food and household items including clothing. Picknsave now owns or franchises over 10,000 stores world-wide in 30 countries. The company has stores in Europe (in both eurozone and non-eurozone countries), North America and Africa. Picknsave's head office is located in South Africa country. Picknsave has become one of the world's largest chains of stores. Picknsave's Board thinks that there are opportunities to take advantage of the rapid economic growth in China and the associated increases in demand for food and consumer goods. Structure The Picknsave Group is structured into a holding company, Picknsave, and three subsidiary companies which are located in each of the regions of the world in which it operates (Europe, North America, and Africa). The subsidiary companies, referred to as \"Regions\" within Picknsave, are respectively Picknsave Europe, Picknsave America and Picknsave Africa. Regulatory issues Picknsave's subsidiaries in Africa have sometimes experienced governmental regulatory difficulties in some countries which have hindered the installation of improved information systems. To overcome some of these regulatory restrictions, Picknsave Africa have, on occasions, resorted to paying inducements (bribes) to government officials in order for the regulations to be relaxed. In a recent internal report commissioned by the directors of Picknsave it was stated that the health and safety laws in the countries in which Picknsave operates vary significantly. For example, in some countries it is required that all employees whose jobs involve manual lifting are trained so that they can lift objects without risk of injury. The problem is further complicated by the definition of \"manual lifting\" varying from country to country. Similar issues arise with the need to wear protective clothing and the safe operation of forklift trucks. Picknsave's directors saw the need to provide a safe working environment for Picknsave's employees irrespective of the country in which they work. They asked the Human Resources Director to develop a comprehensive safety manual that either matched or exceeded the minimum requirements laid down by law or other regulation in any of the countries in which Picknsave operated. Copies of the manual were then distributed to wherever Picknsave had employees. All of Picknsave's employees are required to adhere to the rules stated in the manual as a condition of their employment. The manual also sets out a number of broad principles, such as making the general manager of each store personally responsible for the safety of everyone employed at that store. A recent newspaper article published in South Africa, accused Picknsave of exploiting the weak health and safety rules in some countries. The article provided evidence of unsafe operating practices by describing a recent accident in one of Picknsave's stores in Africa. The accident occurred when an employee dropped a heavy box of tinned goods when he was restocking shelves. The crate landed on his foot, and this caused a serious injury because he had not been wearing safety shoes. The store's manager then dismissed the employee because his injury meant that he would not be able to work in the foreseeable future. The accident was described on another employee's personal blog and was picked up by the newspaper. The Regional Human Resources Director in Africa confirmed that the details reported by the newspaper were correct. The employee had not been trained in manual lifting techniques and had lifted the crate carelessly. He did not wear safety shoes because they were not as comfortable as his ordinary shoes. The store's manager had not implemented the health and safety manual that had been issued because he said that compliance with the manual would interfere with the efficiency of the store and that the procedures it contained were unpopular with the employees because they preferred their own methods of work. The Regional Director's report concluded that the store manager's attitude reflected the indifference to health and safety in the workplace that was exhibited by all employees in that region. PART B (10 MARKS) At year end, Mr Gregory Scholtz (CGMA) ACMA, CA (SA), who is an independent service provider engaged to provide accounting service to Sakhile Engineering Solutions (Pty), uses the 'Collaborate Cloud based system\" function in the accounting system to remotely review idler and conveyor belts and other mining equipment that they manufacture, invoices are generated, and other documents are stored in the database. Mr Scholtz seldom makes or processes any further adjustments and \"signs off\" management accounts and financial statements. A time stamp on the Collaborate function shows that he spends no more than ten minutes reviewing and signing off the management accounts and financial statements. However, Mr Scholtz's invoice reflects that four hours' work were done. Sakhile Engineering Solutions (Pty)'s more recent financial year end was 30 April 2023. For the company's tax returns, Mr Scholtz used a junior accountant who made significant mistakes in completing the sales tax returns and this resulted in a fine and interest charges for an underpayment of the sales tax liability. BCV Auditors have been auditors for Sakhile Engineering Solutions (Pty)since inception of the company and Mr Remember Manaka (CGMA) ACMA, CA (SA), who has been the audit partner for the past 9 years. Over the years, Mr Remember Manaka has become good friends with Mr Rajesh Naicker (ACMA, CGMA), the Financial Director and occasionally their families go on holidays together. During the most recent holiday, Mr Manaka told Mr Naicker that Sakhile Engineering Solutions (Pty)expected a drastic reduction in its audit fee, rather than an increase, otherwise it would have to put the audit to tender. Sakhile Engineering Solutions (Pty)is a significant customer for BCV Auditors and as a result Mr Manaka is under pressure to reduce the number of people on the audit to keep the audit fees low. REQUIRED Discuss any concerns you may have regarding the professional conduct of Mr Manaka (the audit partner) and Mr Scholtz (the independent service provider engaged to provide accounting services). (10 Marks) Internal audit The Head of Picknsave's Internal Audit department is preparing next year's audit plan. He is aware of the Board's increasing interest in Health and Safety issues and intends to include an audit of the extent to which the procedures and practices stated in Picknsave's health and safety manual have been adopted throughout the group. Feedback from the internal audit staff based at each of the regional offices suggests that managers and staff in some countries are more receptive to supervision and management reviews than others. Some cultures place considerable emphasis on complying with rules and respect for authority while others emphasize individual empowerment. The Head of the Internal Audit department recently sent a memo to all of the internal auditors in the Picknsave group that said: \"I would like to remind all members of the audit department, irrespective of the country in which they are based, that they should be careful to avoid causing resentment when dealing with other employees\". REQUIRED a) Discuss the factors that the Head of the Internal Audit department should consider when planning an audit of the extent to which all employees of Picknsave's stores are complying with the rules and principles as stated in the health and safety manual. (10 Marks) b) Discuss the memo sent by the Head of Picknsave's Internal Audit department with regards to the Health and Safety issues for the company. (10 Marks) 1 mark for presentation