AUE2602 Assignment 2B (COMPLETE ANSWERS) Semester 1 2024 (881128) - DUE 4 April 2024

AUE2602 Assignment 2B (COMPLETE ANSWERS) Semester 1 2024 (881128) - DUE 4 April 2024 ... 100 % TRUSTED workings, explanations and solutions. For assistance call or W.h.a.t.s.a.p.p us on +/ 2/ 5/ 4 /7 /7 /9 /5 /4 /0 /1 /3 /2 . PART A Question 1 You are the senior trainee accountant on the audit of MNO Ltd, an information technology company listed on the JSE. You have been assigned to review whether MNO complies with the King IV Report on Corporate Governance for South Africa 2016, specifically with regard to the composition and function of the audit committee. The following information has been provided to you by the audit partner: MNO held one audit committee meeting during the financial year ended 28 February 2022. The audit committee consisted of three members: Miss Sizwe, Mr Carl and Mrs Garnet. Miss Sizwe was the human resources director and the chairperson of the board. Mr Carl was the financial director and a retired CA(SA). Mrs Garnett was an independent non-executive director with limited knowledge of IFRS, integrated reporting and internal controls. The position of chief executive auditor was vacant, and Mr Carl indicated that he would inform the audit committee that the board was in the process of appointing a chief audit executive. Mr Carl highlighted that the integrated reports for the previous two years were in process and that he would provide copies to the audit committee once they had been finalised and published. REQUIRED Identify six (6) corporate governance concerns in terms of the King IV Report on Corporate Governance for South Africa 2016 regarding the audit committee as evident from the information above and give reasons for your answer. (15) Two presentation marks will be awarded if the answer is presented in the following required format and for communication, logical reasoning and structure. (2) Concern 1 mark each Reason 1.5 marks each Max 6 Max 9 3 PART B 23 marks Question 1 17 marks Bumbles (Pty) Ltd is a wholesaler of plastic items located in Johannesburg. The financial accountant, Ms Nkosi, has requested your advice about the weaknesses in the company’s revenue and receipts cycle. You observe the following: The company’s accounting system is partially computerised. Orders are received by the order clerk, Mr Windsor via email, but owing to time constraints all orders are not recorded and processed. The order forms are randomly numbered by the system. Once the order has been received, Mr Windsor keys in the customer’s account number and a screen appears that indicates whether the customer has exceeded his/her credit limit. Mr Windsor evaluates the customer’s credit limit and if the customer’s credit limit has been exceeded, the credit controller is requested to override the system to proceed with the sale. Mr Windsor confirms the availability of inventory, and the order is routed to the accounting department. Thereafter, a picking slip is printed and submitted to Mr Parks, the despatch clerk. Mr Parks picks the inventory listed on the picking slip from the shelves and hands the inventory to the delivery person. REQUIRED Describe six (6) weaknesses in the revenue and receipts cycle of Bumbles (Pty) Ltd and describe the effect of each weakness on the accuracy of the accounting records. (15) Two presentation marks will be awarded if the answer is presented in the following required format and for communication, logical reasoning and structure. (2) Weakness 1 mark each Control 1.5 marks each Max 6 Max 9 4 Question 2 6 marks You are the internal auditor of Cyber Star Limited (“Cyber”). Cyber uses a batch input system to process transactions in an integrated accounting system. During the audit of trade receivables and sales, you were assigned to perform walk-through tests on the trade receivables and sales application program for the year. The following errors were detected: (1) The price of an item on one of the invoices was incorrectly entered into the system as R10 001. The maximum selling price of any item is R10 000. (2) A sales invoice for an amount that exceeded the customer’s pre-authorised credit limit was entered into the system. (3) An invoice was identified where the VAT number of a client had not been entered into the system. REQUIRED Explain the automated controls that should be in place for each item.