You are currently engaged in the external audit of Supa Glass Limited $($SG$)$ for the year ended $31$ August $2018.$ SG is listed on the JSE Securities Exchange. The audit must be completed before $15$ September $2018.$

SG is a new audit client to your audit firm and you have already gathered information to pain an understanding of the entity and its environment, including its system of internal control.

STRATEGIC OVERVIEW

SG is a highly focused business based on a customer$-$driven culture that places partnerships with customers at the core of its business. Their drive for operational excellence has enabled the delivery of lower costs, improved efficiencies and innovative products.

Strong cashflows from operations in previous years have enabled the group to comfortably fund investments in capacity and its existing operations and to expand capacity. In the current financial year, operating profit has however been negatively impacted by the eflect of a strong rand on selling prices of tableware which competes directly with imported products. The company has therefore decided to increase exports and to also sell to smaller customers from a warehouse in Kempton Park A long$-$term lease agreement has been entered into for the warehouse.

Commercial container glass is made by melting sand, soda ash and limestone in furnaces using recycled glass $(\text{'}$cullet$").$ The loading bin of the furnace is filled with a batch of these raw materials. The raw materials are continuously fed to the furnace where these are converted to molten glass and maintained at temperatures in excess of $1,500C$ Molten glass is continuous withdrawn through a channel where it flows to the refineny area of the furnace and is cooled to approximately $1,100C,$ before being distributed to the various glass$-$making machines vas the forehearths.

The molten glass then enters the feeder in the hottle making nachine, where the usoltenglass is cut into pieces of predetermined weight $["$gubs$").$ Fonth of which is required to mathe a single bottle. These gobs of malteng glass are then inalividually ted inta moulds.

The furnaces are fully computerised and critical parameters are controlled within very close tolerance margins. SG$\text{'}$s furnaces are designed to be the most modern in the world with a production flexibility of more than ten years. The lifespan of the refractory $($lining$)$ part of the furnace is only three years. The company must rebuild a furnace after the three$-$year lifespan of the refractory by replacing only the refractory of the furnace.

PROPERTY, PLANT AND EQUIPMENT

Accounting policy: Property, plant and equipment Property, plant and equipment are carried at cost$,$ less accumulated depreciation and impairment losses. Depreciation is charged on a straight$-$line basis over the estimated useful lives of each component of an item of property, plant and equipment. Land is not depreciated. The estimated useful life of plant and machinery is between three and ten years. Where appropriate, and if material, expected residual values are taken into account in determining the depreciable values of assets.

Accounting policy: Investment property Investment property is stated at fair value in the balance sheet date. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise.

Acquisitions Capital expenditure of SG amounted to R$416$ million in the current year. The capital expenditure projects were:

Cullet expenditure of R$116$ million $-$ refractory rebuilt at the end of its three$-$year useful life;

Glass recycling cullet plant in Pretoria, constructed by an established international engineering company;

Glass forming machines at the Wadeville plant, bought in Italy and installed by the company; and

A third furnace at the glass manufacturing plant in Clayville, constructed by an established international firm.

The glass manufacturing facilities operated at full capacity and also above the standard efficiency. In addition to the above capital projects, the Bellville furnace will be rebuilt during July $2019.$ The estimated cost of the project, adding $50000$ tons of capacity. This will result in a $25\%$ increase in the total glass capacity of SG$.$

Disposals SG sold special glass$-$blowing equipment, used for the manufacture of lead$-$cut glass, with effect from the White River studio. The artist and this equipment was on loan$/$hire to SG from the artist's studio due to delays by the building contractors in the completion of his studio. The equipment had already been packaged and full payment for the equipment was received, but the artist requested the company not to deliver it$.$ Ownership of the equipment still lies in White River.

Investment property The investment property relates to properties that are no longer needed for retail purposes and are available for rental to third parties. The fair value of the investment