You are an Audit Manager at an audit firm called Davies Auditors. You have been

working at this firm for more than ten years.

You are currently busy finalising the audit of Prime Foods Ltd $("$Prime$")$ for their $30$

June $2023$ financial year$-$end. Prime has been a client of Davies Auditors since Prime's

inception in $1983.$ Prime has a June financial year$-$end and has been listed on the

Johannesburg Stock Exchange $("$JSE$")$ for over ten years.

Prime is a manufacturing and distribution company that produces a variety of instant

foods. Prime owns its manufacturing plant and warehouses but rents the entity's Head

Office. Inventory is the largest balance on Prime's Statement of Financial Position and

consists of raw materials, work in progress, and finished goods. Raw materials are

purchased from both local and foreign suppliers.

All of Prime's finished goods are distributed and sold in bulk from the entity's

warehouses across South Africa. The entity also recently started selling online in

smaller quantities to the general public and, since then, the online platform has

significantly expanded and contributed to increased revenue.

The materiality of Prime is set at R$3$ million for the current June $2023$ financial year$-$

end audit.

During the audit, and while conducting substantive audit procedures, the following

unadjusted audit differences were identified:

During the financial year, Eskom implemented load shedding, which resulted in

almost $8-12$ hours per day of no electricity. Additionally, a power surge occurred

at the manufacturing plant on the ${17}^{th}$ of July $2023$ that destroyed certain

electronics and appliances. This power surge damaged outlets and electrical

wiring and caused a fire. Some of the manufacturing machinery and a

significant amount of inventory were damaged during this fire.

The assessor from the insurance company estimated that it could take Prime

at least eight weeks to return to normality depending on the outcome of theYou are an Audit Manager at a firm called Flash Auditors. You have been assigned to

the audit of Craven Team Pty Ltd $("$Craven$")$ and are currently finalising their August

$2023$ audit.

Background information of Craven

Craven's Head Office is situated in the Western Cape with branches in Cape Town,

Port Elizabeth, East London, and Johannesburg. Craven owns a fleet of trucks that

are used to provide transportation services. Craven offers high$-$quality services and

transportation at excellent prices. Craven also buys and sells trucks.

Craven has become a leader in the freight & container transport industry. They have

various fleets consisting of heavy$-$duty trucks, trailers, side loaders, side tippers, low

beds, $12m$ flat decks, and $18m$ link trailers and they offer a specialized transportation

industry experience focusing focused on each client's unique needs.

Furthermore, Craven specialises in providing long and short$-$distance road freight and

container transport and operates along all major routes in South Africa. All trucks have

satellite tracking to enable effective control of all their operations.

The final materiality for Craven has been set at R$4$ million.

The annual general meeting is planned for $27$ October $2023$ and the annual financial

statements $("$AFS$")$ will be circulated in September $2023.$

The following is Craven's abridged Statement of Financial Position as at $31$ August

The following additional information relating to Craven is available:

During the current financial year, one of the founding members passed away. He

was the CEO of the company. Craven is a family company and the role of CEO

now rests on his son who is a third$-$year student at university and is not very excited

to take over as the CEO yet.

Craven is in the process of extending the entity's overdraft facility.

During the financial year, certain motor spare parts could not be imported due to

sanctions. One of Craven's largest customers which represents $38\%$ of Craven's

annual sales, plans to cancel their orders due to Craven not delivering the orders.

Additionally, the customer plans to take legal action against Craven for loss of

sales.

The Board of Directors of Craven is planning to expand the variety of motor spare

parts that the entity imports for resale. Based on Craven's income projections, the

entity should be able to make a substantial profit from these additional products.

The accounts receivable regressed and are currently at $150$ days even though

Craven's policy is $60$ days.

Craven's accounts payable have also increased in the current financial year and

the CFO negotiated with Craven's top two largest suppliers, which represent $45\%$of the total of the accounts payable, to extend the payment term from $30$ to $60$

days.

One of the Second Year Audit Clerks inspected the Board of Directors' minutes of

meetings and found that shares were issu