Part A

Once the audit on the online ordering department of Sun$-$look Ltd was completed, an audit was

scheduled for the distribution process. It was noted that few credit notes were processed for

sunglasses returned by customers. The internal audit manager requested the junior internal

auditor to obtain audit evidence that relates to the audit objective that relates to the processing

of the credit notes. The junior internal auditor presented the following audit evidence that was

obtained regarding the processing of credit notes:

$1.$ Credit notes of the sunglasses that were returned were inspected for approval.

$2.$ The manager of the distributions department was interviewed and asked to explain the

various processes followed when processing a credit note.

$3.$ The senior internal auditor directly observed the processing of a credit note.

$4.$ The total value of credit notes processed during the year, was calculatd and compared to

last year$$s value.

$5.$ Obtained a list of all returns and inspected that valid reasons were noted by the customer

for returning the sunglasses.

REQUIRED

$4\mathrm{.}1$ Classify each of the audit evidence listed above $(1-5)$ into the different kinds of

audit evidence.

$4\mathrm{.}2$ List and describe the characteristics with which audit evidence must comply as

per the IIA Standards

Part B

Thabo Ndlovu,the internal audit manager and Amani Naidoo, the internal auditor, were

responsible for completing and finalising the audit of the distributions department of Sun$-$look

Ltd$.$

The purpose of the audit was to audit the adequacy and effectiveness of the internal controls

over the distribution process.

On $10$ March $2024,$ a sample of $50$ orders was selected and reviewed by Amani. The sample

was randomly selected from a total of $250$ orders for the period $1$ January $2024$ to $30$ April

$2024.$

Orders selected were reviewed to establish:

$$ Whether orders were paid in full before the sunglasses were dispatched to the

customer.

$$ Ensure that all orders were dispatched within the $24-$hour turnaround time.

The following was noted on the working paper SGL$001$

Thabo Ndlovu reviewed the working paper on $2$ June $2024.$ Upon further investigation the

following became clear:

$$ It was noted that some orders were dispatched before it was paid in full. According to

company policy all orders should be paid in full before sunglasses can be dispatched to the

customer.

$$ The clerk in the distribution department can override the system and authorise the

sunglasses to be delivered without the full amount being settled.

$$ Due to the orders not settled in full the bad debts increased by $7\%$ for the period

ending $30$

April $2024.$

REQUIRED Marks

$4\mathrm{.}3$ Compile a working paper that contains all the relevant information that should

be included in a working paper. In your design and compilation of the working

paper, ensure that it includes all the elements of a working paper.

$4\mathrm{.}4$ List and describe the three requirements that every sample selected must

comply with.

$4\mathrm{.}5$ Based on the information provided regarding the orders not paid in full,

formulate a complete audit finding. The finding should be structured using the

five $(5)$ elements of an audit finding as headings.