Your audit firm was appointed as auditors of Molteno (Pty) Ltd (following the resignation of the previous auditor) in the current year. Permission was obtained to consult the previous auditors.

The following information pertains to the company:

Molteno is a medium sized company which sells Italian-made furniture and luxury kitchen fittings.

The company was started twenty years ago and has grown into a large family business with seven outlets situated in three major cities in South Africa. Individual outlets are not particularly large, but collectively the inventory of furniture and fittings are considerable.

The shares in the company are held by the Molteno family, and all senior positions are held by members of the family.

All furniture and fittings inventory are imported. Suppliers are mainly situated in Veneto, Tuscany and Milan.

Revenue is derived from the sale of furniture and fittings for cash, on credit, and a variety of hire-purchase and instalment sales agreements.

An incentive system is in place that is based on revenue targets and gross profit margins. And bonusses are paid to managerial staff if targets and margins are exceeded.

Roberto Molteno, the managing director, has indicated that they have implemented an internal auditing department from the beginning of the year headed up by his brother and logistics director, Angelo Molteno. Angelo's son and daughter joined the team in the current year, after they matriculated. They have been specifically involved in and performed work on the revenue transactions that occurred during the year.

Molteno has recently undergone a SARS VAT audit. There were a number of serious issues regarding the VAT on imported goods and penalties were levied. Roberto's daughter is responsible for the submission of their VAT returns, she joined the company, also after completing her matric qualification, a year ago. Roberto asked you to inform him of any misstatements identified during the audit of the VAT receivable balance and to especially focus on this.

2. Describe the substantive audit procedures to be performed to obtain sufficient and appropriate audit evidence on the opening balances of Molteno (Pty) Ltd. (
4. You are considering to making use of a VAT expert. Discuss the factors that need to be considered before you can rely on the work of an expert. 
6. Indicate the audit procedures you would undertake to test the occurrence of sales.