Matter $2$

Gregory Mafokeng is a newly appointed partner at Always Right. His wife, Gina Mafokeng owns $60\%$ of Rainbow $($Pty$)$ Ltd$.$ Rainbow $($Pty$)$ Ltd owns $75\%$ of the shares in Wall $($Pty$)$ Ltd$.$ Wall $($Pty$)$ Ltd is an audit client of Always Right.

REQUIRED: Marks

PART A

$1.$

$1\mathrm{.}1$

Refer to the background information and:

Calculate the public interest score of Health Organic and conclude whether the financial statements of Health Organic need to be audited or independently reviewed in terms of the Companies Act.

Communication skills: Clarity of expression

$(8)$

$(1)$

$1\mathrm{.}2$

Assume that the MOI of Health Organic requires the company to be audited. Discuss whether $$absolute assurance$$ can be provided over the company$$s annual financial statements.

$(3)$

$2.$

$2\mathrm{.}1$

Refer to matter $1($audit committee$)$ and:

Discuss in terms of the Companies Act requirements whether you would recommend any of the two suggested individuals for appointment to the audit committee of Health Organic.

$(6)$

$3.$

$3\mathrm{.}1$

Refer to matter $2($internal controls$)$ and:

Indicate which one of the five components of Health Organic$$s system of internal control are described in points b$-$h respectively.

$(7)$

$3\mathrm{.}2$

With reference to $3\mathrm{.}1,$ where you identified the components of Health Organic$$s system of internal control as control activities, describe the objective of each control activity.

Communication skills: Structure your answer as follows:

$3\mathrm{.}1$ Component of the system of internal control

$3\mathrm{.}2$ Objective of the control activity

Example

Example

a$.$ Control activity

To prevent and detect errors and fraud by ensuring that no single individual has control over all aspects of any significant transaction in the inventory cycle.

Maximum $7(7\backslash$times $1)$

Maximum $4(1)/(2)(3\backslash$times $1(1)/(2))$

$(4(1)/(2))$

$(1)$