Question $1$

CALC $($Pty$)$ Ltd is a bookstore store with branches across South Africa. The company

expanded operations during the financial year to include stationery and a "prescribed

handbook" division.

The following additional information is provided by the auditee:

CALC $($Pty$)$ Ltd opened two new branches during the financial year.

On $5$ December $2022,$ the financial manager of CALC $($Pty$)$Ltd was suspended pending

an investigation due to suspected fraud. The previous audit manager, the brother of the

financial manager, refuses to share prior audit files and information.

On $1$ October $2022$ a total of $1500$ handbooks were ordered and invoiced from

Knowledge Ltd$.$ for a total of $$63150.$ The handbooks were shipped on $6$ October $2022$

when the exchange rate was $R\frac{12\mathrm{.}68}{\text{\$}}.$

The goods arrived in South Africa on $13$ November $2022$ and the SARS return reported

the transaction inclusive of VAT to the value of R$104445$ and customs duty of R$40037.$

The goods were shipped to the CALC $($Pty$)$ Ltd head office on $23$ November $2022$ for an

additional transport cost of R$6850.$ The transport company was paid in advance as they

operate strictly on a cash basis.

On delivery of the handbooks at head office on $8$ December $2022$ a goods received note

was signed by the receptionist and the invoice from Knowledge Ltd$,$ payable on $31$

January $2023$ was accepted. The delayed payment terms are considered normal trading

arrangements with the supplier.

Trade payables reported on the financial statements for the year ended $31$ December

$2022$ amounts to R$855420$ with a comparative of R $1362530.$ The client provides the

creditors listing, the age analysis, the creditors ledger, the creditors control account, the

supplier statements, the invoices and payment confirmations, the orders and the

correspondence files.

On $31$ December $2022,$ the trade payables consisted of $23$ individual creditor accounts.

On $31$ December $2021,$ the balance comprised $26$ accounts. CALC $($Pty$)$ Ltd has only

one foreign creditor.

CALC $($Pty$)$ is a registered VAT vendor and reports all transactions in terms of the

International Financial Reporting Standards. You have been assigned to the regulatory

audit of CALC $($Pty$)$ Ltd for the year ended $31$ December $2022$ and the engagement

partner allocated the Trade Payables section to you.

Required

$1\mathrm{.}1$ Formulate the risk assessment that should have been prepared on the

acceptance of CALC $($Pty$)$ Ltd as a client.

$1\mathrm{.}2$ Develop the substantive audit procedures you need to perform to obtain sufficient

and appropriate audit evidence to confirm the valuation, the classification and the

completeness of the trade payables disclosed on the financial statements for the

year ended $31$ December $2022.$