You are an audit senior in a Snoopers LLP, a firm providing audit and assurance services for a wide variety of clients. At the request of your partner, you are preparing the audit programme for the sales and debtors systems of Vroosh Ltd (Vroosh). The Vroosh Permanent Audit File contains internal control questionnaires for the goods out and sales system as well as the audit programmes used last year. Vrooshs system of internal control has not changed in the last year and the partner has specifically requested that you do not use CAATs. Vroosh Ltd Vroosh Ltd is a wholesaler of bedroom goods such as beds, mattresses and bedside tables. The company maintains one large warehouse in Glasgow. The customers of Vroosh are owners of retail shops where bedroom goods are sold to members of the public. Vroosh sells to authorised customers following appropriate credit checks and each customer is given a Vroosh identification (ID) card to confirm their creditworthy status. That ID card must be produced for the warehouse manager in order for him to release goods from the warehouse to the customer. Goods out and sales system The goods out (despatch) and sales system operates as follows: 1. Customers visit Vrooshs warehouse and load the goods that they want onto their vans after showing their Vroosh ID card to the despatch staff. 2. A pre-numbered goods despatch note (GDN) is produced and signed by both the customer and a member of Vrooshs despatch staff confirming the goods taken. 3. One copy of the GDN is sent to the accounts department and the second copy is retained in the despatch department. 4. Accounts staff enter the goods despatch information onto the computerised sales system and initial the GDN as evidence of the input onto the system. 5. A stock master file maintains up to date product details and prices. 6. The computer system refers to the stock master file to produce the sales invoice. 7. The computer system then updates the sales daybook and the sales ledger which it reconciles to the debtors control account. 8. The invoice is printed out and sent to the customer in the post and a paper copy is maintained in the accounts department. C39AU Page 3 of 4 Semester 1 2021/22 9. The invoice is compared to the GDN by the accounts staff who sign it to evidence that the two agree. 10. Paper copies of the debtors ledger control account and list of aged debtors are maintained in the accounts department. 11. Breaks in the GDN sequence are indicated by the computer system which prints off an error report. Information on debtors The chief accountant has informed you that debtors days have increased from 45 days (the credit term) to nearer 60 days over the last year. The aged debtors report produced by the computer is produced below. You decide that in view of the deteriorating debtors situation, a direct confirmation of debtors should be performed this year. Aged Debtors Report No of Debtors Range of debt Total Debt Current 30-60 days More than 60 days 30 Less than 0 (174,518) (174,518) 394 0 - 20,000 4,335,524 1,097,788 1,287,046 1,950,690 306 20,001 - 50,000 11,016,154 4,088,506 5,470,146 1,457,502 46 50,001 and over 2,990,996 1,500,470 1,345,500 145,026 776 18,168,156 6,512,246 8,102,692 3,553,218 Required: 1. Explain how you would check the accuracy of the previous years internal control questionnaires. (10 marks) 2. Identify six controls in the documented despatch and sales system at Vroosh Ltd and describe the objective of each control. (12 marks) 3. List six tests of control that you would undertake on the despatch and sales system at Vroosh Ltd and explain the reason for each test. (9 marks) 4. State and explain the meaning of the four main assertions that relate to the direct confirmation of debtors. (10 marks) 5. Describe the procedures required as far as the despatch of letters for a direct confirmation of debtors. (5 marks) C39AU Page 4 of 4 Semester 1 2021/22 6. Explain which types of categories of debtor should be chosen for your sample. (4 marks) 7. List and explain four factors that will enable you to decide when you have sufficient evidence.