QUESTION $3(20$ Marks$)$

ABCD is an accounting practice situated in Durban. You, a newly graduated auditor from Mancosa joined the company in

$2023.$ After a $6-$month induction process, your manager, Kenneth, requested you perform an audit engagement on JVC

Holdings$.$ JVC Holdings acceptable risk is $4\%,$ and the inherent and control risk is $80\%$ and $100\%$ respectively. Kenneth

would like you to present the audit risk model, detail the three $(3)$ elements of audit risk and calculate and interpret the

detection risk results of JVC Holdings.

QUESTION $4(20$ Marks$)$

Ballies Motor Corporation manufactures various models and types of motor vehicles which are sold to motor dealerships.

Various manufacturing plants are in operation throughout the country. At each of these plants, various materials to be used

in the manufacturing process are received daily. These goods arrive in large delivery vehicles and are received at a

warehouse by a warehouse supervisor. The following specific activities take place at the warehouse:

$1.$ Ms Mokuve the purchasing Manager signs a purchase order form $($to confirm the materials to be ordered from the

supplier$)$ and sends a copy of the purchase order to the warehouse.

$2.$ At the warehouse, an Inventory Clerk Owen Tallman receives the materials needed for production and issues a printed

goods received note $($as proof of receipt$)$ to Claude the delivery man. The delivery man, Claude issues a delivery note

which is signed by Shazia the warehouse Manager as proof of delivery $/$ receipt of goods. The Warehouse manager, Shazia

compares quantity received on the delivery note to the quantity received on the goods received note.

$3.$ Store woman Sharne transfers the materials received to a storeroom and locks the storeroom.

$4.$ Store woman Sharne is only responsible for the receipt of materials whereas Store woman Atasha is responsible for

transferring these materials to the factory where production takes place.

$5.$ At the end of every month, a physical stock count is performed at the warehouse to determine the number and value of

materials on hand.

REQUIRED

$4\mathrm{.}1$ For each of the above activities that take place at the warehouse, identity the specific type of control

activity. For each control activity, briefly describe a risk that is mitigated by the type of control activity. Your

answer can be tabulated as the below example$$

$(10$ marks$)$

Type of Control activity Risk

$4\mathrm{.}2$ Discuss the Limitations of Internal Controls. $(10$ marks$)$

QUESTION $5(20$ Marks$)$

In today$$s complex and rapidly changing technology environment, it is important to master the right techniques which could

be used across enterprises and across various technology platforms. Typical of an IT environment, are the speed of

processing, large capacity of storage, lack of the paper$-$based trails, the radically different way of information processing,

the ease of information access, internal controls being imbedded and the ever$-$present risk of failure of IT and loss of data.

As a newly graduated techno savvy auditor, you must write a Report to Mrs$.$Thobile the Accounting Director and convince

her of the following$$

$$ Factors that influence your decision to use CAAT$$

$$ together with the advantages and disadvantages of using CAAT$$

$$ You must present examples to further strengthen your argument.

QUESTION $6(20$ Marks$)$

The retirement of Long$4$Life chief executive Brian Joffe, only to move to the chairperson$$s office, is the latest such transition

in South Africa$$s business sector that has raised concerns about the blurring of lines to the detriment of corporategovernance integrity. There are risks when this cooling$-$off period is not observed, especially when there is a strong chief

executive who could have an influence on the board, according to advocate Annamarie van der Merwe, executive chair of

the FluidRock Governance Group and, until recently, a longstanding member of the King Committee on Corporate

Governance. Commenting on the move by Long$4$Life$$s Joffe, she said: $$Is this the right decision with Brian? I do not know

and that is the job of the board. They were comfortable, at the end of the day, with that decision.

From the above extract do you agree with the suitability of Mr Joffe as Chairman of the Board from a Good Governance and

King $1$V perspective? Present your argument and align your discussion to the Correct Principle$/$s of The King $1$V Report.

Include the recommended Practices.