AUI3702 Assignment 2 (ANSWERS) Semester 1 2026 - DISTINCTION GUARANTEED. P

Comprehensively structured AUI3702 Assignment 2 (ANSWERS) Semester 1 2026 - DISTINCTION GUARANTEED. Prepared to a distinction standard with detailed and well-developed responses.. QUESTION 1 18 MARKS Rainbow Paint Ltd is a large manufacturer of paint and related products. The company’s products are aimed exclusively at the high-end market, and it has built a reputation for quality. The market for this type of product is very demanding, and it is extremely important for manufacturers in this sector to maintain product quality. The directors are considering introducing an affordable (value-for-money) range of paint into the local market, specifically aimed at the mass housing sector. This market is very competitive and specialised in its own way, but the production director has suggested that the company’s existing manufacturing equipment could be adapted to produce the low-quality paint. The company has a diverse operational staff ranging from many semi-skilled wage earners to scientifically trained product researchers. All the product researchers are trained in Germany. Rainbow Paint Ltd.’s manufacturing process for its major product (paint) is complex. Innovation and development in paint manufacturing technology aim to produce higher-quality paint. Rainbow Paint Ltd.’s preferred method of funding equipment is by financial lease. All the major equipment and machinery must be imported from Germany. German technicians fly out twice a yeart o service the equipment. All the company’s information systems, for example, financial, marketing, inventory control, as well as the manufacturing process, are computerised, the latter being a very sophisticated system. Most of the raw materials for manufacturing are imported. The paint manufacturing process produces extensive waste, some of which is used to manufacture related products. Rainbow Paint Ltd does export some paint, but most sales are local. The paint manufacturing industry is highly regulated regarding pollution, emissions, and other environmental impacts. Because raw materials are imported, Rainbow Paint Ltd must maintain substantial inventories, many of which are highly flammable. The board of directors believes strongly in sound corporate governance, including compliance with King V. The risk management process is overseen by a risk committee. For the purposes of risk assessment, the risk committee categorises the risks faced by the company into the following risk types: 1. Strategic: the risks associated with strategic decisions to be taken by the company. 2. Financial: risks that have a direct effect on the financial aspects of the company. 3. Reputation: risks to the reputation of the company. 4 . Compliance: the risk that a business decision may result in significant breaches of legislation. 5. Operational: risks which arise from the operation of a paint manufacturing process. 6. Information: risks facing the company’s information technology systems. ee AUI3702/201/1/2026 REQUIRED 1.1 Identify, from the information given above, the risks that Rainbow Paint | (18 Marks) Ltd faces. You must describe two risks for each risk type identified in the question. Note: Please make sure that you use the following structure to draft the risk, as the marks are allocated as such: e Risk event (4) e Cause (‘%) e Effect (4) QUESTION 2 12 MARKS You have recently been appointed as the internal audit manager at Bahloli Betimali Chartered Accountants and Auditors (“BB”). BB is a firm of chartered accountants and Auditors based in Mbombela. You have received an email from Ms. Khensani Baloyi, your director from BB. Ms. Baloyi is the engagement director for the internal audits of Ditaemaneng Metropolitan Municipality. The email read: Dear Manager, | trust this email finds you well. | have received a call from the Chief Audit Executive (CAE) of Ditaemaneng Metropolitan Municipality. She informed me that she has started drafting an internal audit plan for the new year, Le., 07 July 2025 fo 30 June 2026. She was of the view that the current internal audit plan should be carried forward to the next year without any changes, except for hours and the allocation of hours between the municipality's audit resources and ours. | also raised the concern you had regarding us as the internal audit function performing work that is being performed by our colleagues, performance monitoring and reporting, as well as the risk ee AUI3702/201/1/2026 management team. Also, please check the new IIA Global Internal Audit Standards for me regarding the quality of the internal audit function. All the best, man, and happy audit week. Regards, Ms. Baloyi, CIA; CRMA; CISA Director: Bahloli Betimali 1 Nels Avenue Mbombela 1200 baloyik@Bahloli B REQUIRED With reference to the new IIA Global Internal Audit Standards, advise Ms. Baloyi and the CAE regarding the following: 2.1 The process to follow when developing an internal audit plan, along with the | (8 Marks) considerations to keep in mind. 2.2 How the duplication of work between internal audit and the colleagues from | (4 Marks) performance monitoring and reporting, as well as the risk management unit, can be minimised. QUESTION 3 20 MARKS You are a member of the audit team for Plumate (Pty) Ltd, a large plumbing concern with a financial year-end of 31 December. The business, owned by several individual shareholders, focuses on the domestic market. The company has 60 teams of two (an artisan and his assistant), which operate within a 100-kilometre radius of the head office in the industrial area of Isando, outside Johannesburg. The company purchases small Nissan bakkies, which it customises at a cost of roughly R10 000 per vehicle, into mobile workshops suitable for the company’s purposes. Each team is assigned a vehicle, which the artisan may take home each evening. However, every vehicle must return to the ee AUI3702/201/1/2026 head office on Friday afternoons to be cleaned and restocked, and to hand in the week’s job cards. Vehicles are collected by the artisans on Monday morning at 7 am, unless they are on weekend duty. For the teams on weekend duty, the vehicle is taken on Friday evening after it has been cleaned and restocked. Ten teams are on duty each weekend on a rotational basis. All vehicles are linked to the head office by radio and cell phone and therefore do not need to return to the head office (except on Fridays) when they are not on a job (which is very rare). Since vehicles do not regularly visit the head office, it has been necessary to provide each team with a means to purchase plumbing supplies to complete their jobs without delay. Each team carries a range of requisites in their bakkies, but this is not always sufficient; some teams must spend up to R500 a week on items not in the standard range that they carry. Traditionally, each artisan has been given a cash float, but with the steady expansion of the business, this has proved unsatisfactory as it presents a significant security risk. The directors now wish to do away with the cash float system and introduce a credit card system to facilitate the purchase of extra plumbing requisites. REQUIRED Describe the controls that should be put in place by Plumate (Pty) Ltd to ensure that purchases made using credit cards are valid and that the recording of purchases is accurate and complete, including the charging of such purchases to jobs carried out by the various teams. Focus your answer on the following: 3.1 Issuance of credit cards (5 Marks) 3.2 Credit card purchases (5 Marks) 3.3 Segregation of duties (5 Marks) 3.4 Reconciliation of credit card purchases (5