Question 5 Study the scenario and complete the question(s) that follow(s): Brandwear (Pty) Ltd You have been on the audit of Brandwear (Pty) Ltd, a clothing manufacturer, for the last two years. You are currently working on the 30 June 2021 year-end audit and have been assigned to the audit of cash and bank. As part of risk assessment procedures carried out at the planning stage, you have been requested by Otis Redding, the financial manager of Brandwear (Pty) Ltd, to evaluate the internal controls at Cashwear. Cashwear is the sales outlet (factory shop) attached to the factory from which clothing, manufactured by the company, can be purchased at reduced prices for cash. Your enquiries into Cashwear revealed the following: 1. The outlet was opened in September 2020 for employees of Brandwear (Pty) Ltd only. Because it proved to be so popular, it was opened up to the general public. Although this increased sales significantly, internal controls at the outlet were not adequately adapted to deal with the increase. 2. Sales are only made for cash and no other payment is accepted. The directors will not consider running the on anything other than a cash basis only, as this significantly reduces administration costs and no losses can be suffered from bad debts or credit card fees. 3. The outlet is located at the rear entrance to Brandwear (Pty) Ltds warehouse. Clothing for the outlet can be conveniently transferred onto the shelves and racks in the outlet through an interleading door. Employees can go through the doors as they wish and customers have easy access to the outlet as the doors lead directly to the street. 4. Opening hours are from 7:30 a.m. to 4:30 p.m. 5. The outlet is run by Greta Garbo. On occasion, she calls on one or two stores clerks to help her if the outlet gets too busy. 6. As sales are cash only, customers receive a cash receipt. Greta Garbo is the only person who is authorised to prepare the receipt and writes it out on a blank piece of paper (using a sheet of carbon paper to make a duplicate). She enters the details of the clothes purchased and then stamps both copies with the Brandwear (Pty) Ltd business stamp. The customer is required to sign both copies and may keep the original. COAGB2-B44 Take-Home Assessment Block 4 2021 | V1.0 Page 8 of 15 7. All cash received from customers are placed in a large metal cash box, which is kept under the sales counter. Only two people have keys to the box, namely Greta Garbo and Vish Naidoo, one of the accounting clerks. 8. At 4:30 p.m. each day Greta Garbo or one of the stores clerks drops the locked cash box at the accounting department. Vish Naidoo collects the box when he is ready, empties the cash, and places it in the company safe. 9. Each morning, Greta collects the cash box, containing a cash float of R200, to continue with the days sales. 10. The daily cash from sales in the Cashwear outlet is kept in the company safe until Friday morning, when Joe Phule, the factory administration clerk and senior wages supervisor, takes cash out to make up the weeks necessary wage packets. Any extra cash is deposited in the companys bank account. 11. At the end of each month, Greta Garbo and Joe Phule notify Otis Redding of the total amount of cash sales by totalling the duplicate receipts and the total amount of wages from the wage records.

5. Identify the weaknesses and potential risks in internal controls relating to Brandwear (Pty) Ltds factory shop Cashwear. (30 Marks