You are an Audit Senior on a client called We Love Animals Limited $($WLA$)$ with a

financial year ending $31$ August $2024.$ WLA is a listed company registered on the

Johannesburg Stock Exchange $($JSE$).$ WLA is a manufacturer that supplies pet shops

with pet food and accessories.

As an Audit Senior, you reviewed the working paper of the first$-$year Audit Trainee that

related to the legal claims.

Working paper for legal claims

Client: Fish Limited. Year$-$end: $31$ August $2024$

Prepared by: DA Date prepared: Ref:

Legal claims working paper

Procedures performed:

$$ Inquire with management about legal claims.

$$ Request a legal claims schedule.

$$ Inspect meeting minutes for any legal claims.

Findings:

$$ Inquired with management, and there is a material legal claim against the

company for pet food poisoning where many animals died because of its

consumption.

$$ Legal claim schedule obtained and placed in the audit file.

$$ Meeting minutes of the employees were reviewed, and no mention was

made of the current lawsuit against the company.

$6$ HAUD$332-1-$Jul$-$Dec$2024-$FA$1-$TA$-$V$4-16072024$

Payroll outsourcing

WLA has a substantial workforce comprising employees across various

manufacturing, sales, distribution, and administration departments. Given the

complexity and scale of its operations, WLA has opted to outsource its payroll

processing to a reputable payroll service provider, Payroll Expert Solutions $($Pty$)$ Ltd$.$

Payroll outsourcing arrangement:

WLA entered a contractual agreement with Payroll Expert Solutions $($Pty$)$ Ltd to

outsource its payroll processing functions. The outsourcing agreement outlines the

scope of services provided by the payroll service provider, including:

$$ Calculation and processing of employee salaries, wages, and bonuses.

$$ Administration of employee benefits, such as healthcare plans, retirement

contributions, and leave accruals.

$$ Withholding and remittance of payroll taxes, including income tax,

Unemployment Insurance Fund $($UIF$),$ and Pay As You Earn $($PAYE$).$

$$ Compliance with regulatory requirements, including tax laws, labour laws, and

industry$-$specific regulations.

$$ Provision of payroll reports and data analytics to support WLA$$s financial

reporting and decision$-$making processes.

$$ Maintain confidentiality and data security measures per the Protection of

Personal Information Act $($POPIA$)$ to protect employee information.

Audit evidence

During the audit at WLA, you were provided with the following audit evidence for trade

debtors:

$$ Printed bank statements received by WLA$$s Financial Manager to determine

amounts received from the trade debtor during the subsequent payment testing.

$$ You sent a debtor$$s circulation with permission from WLA to a sample of debtors

to confirm their trade debtors balance as at the end of the year.

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$$ A sample of debtors was selected, and WLA$$s Financial Manager provided the

outstanding sales tax invoices for the debtors.

REQUIRED:

$2\mathrm{.}1$ Analyse the working paper and discuss the weaknesses in audit documentation

per ISA $230.$

$(10$ marks$)$

$2\mathrm{.}2$ Describe the correct audit procedures that you will perform in the legal claim

working paper.

$(10$ marks$)$

$2\mathrm{.}3$ Discuss the auditor's key considerations for auditing the outsourced payroll

services.

$(10$ marks$)$

$2\mathrm{.}4$ Identify and explain from the audit evidence obtained for the trade debtors if the

supporting documents are reliable. Provide reasons as to why or why not.

$(5$ marks$)$

$8$ HAUD$332-1-$Jul$-$Dec$2024-$FA$1-$TA$-$V$4-16072024$

Competency Reference Framework:

F$2\mathrm{.}2$ Perform an audit of historic financial information

a$)$ By applying F$1,$ follow the stages involved in performing

an audit:

$($iii$)$ Evaluate transactional business processes

$($ix$)$ Assess the evidence and results of the analysis and

procedures

$($x$)$ Document the work performed and its results

$($xi$)$ Draw draft conclusions

F$2\mathrm{.}4$ Communicate audit findings

Communicate matters to be reported to management and

those charged with governance

F$2\mathrm{.}3$ Reliance on other parties

a$)$ Identify the possibility of$,$ and need to$,$ rely on other

parties $($internal auditors, internal and external experts$)$

b$)$ Describe suitable procedures to ensure audit quality is

maintained when relying on the work performed by other