AUI3702 EXAM PACK

AUI3702 EXAM PACK.QUESTION 1 MCQ 1-D 2-A 3-A 4-C 5-D 6-D 7-D 8-B 9-C 10-B QUESTION 2 2.1. Weaknesses Controls Overtime hours are not approved by section head of supervisors and employees work overtime as the feel. Having to work overtime should be approved by the section head or the supervisors The security personal who mans the entrance is only in place during busy Security personnel should be present at all times to ensure that employees clocks S - The study-notes marketplace Downloaded by: mmatshephod | Distribution of this document is illegal S - The study-notes marketplace DEE 7 periods. only once with the clock card There is no segregation of duties as Apple Smith now almost everything in the department There should be segregation on duties in respect to duties carried out by apple smith probably a senior personnel who reviews the duties carried out by him The clock cards are not made in terms of authorized employee list The personnel department should prepare the clock cards in terms of the authorized employee list No segregation of duties Apple smith should not perform all the duties, there should be segregation of duties in respect to duties performed by apple smith There are no independent reconciliations and reviews on the work performed by apple smith and there are only random checks Independent reviews and checks on the work performed by apple smith should be carried out regularly and not on random basis Granny tree cashes the cheque, prepares the pay packets and updates the accounting records Segregation of duties is more essential at this level as fraud can be facilitated by having one person performing all functions Employees are not required to present their identification when collecting their payment Employees are required to present their identification when collecting their payment The two senior personnel who have conducted the payment have not reconciled the unclaimed wages with the register The two senior personnel should have reconcile the unclaimed wages with the register Question 3 3.1 Explain step by step how you would select a sample S - The study-notes marketplace Downloaded by: mmatshephod | Distribution of this document is illegal S - The study-notes marketplace DEE 7 Establish the objectives of the sampling plan -define the extent and composition of the population -select a sampling method -determine the sample size to be taken -evaluate and report results 3.2. Calculate sample size Sample size = total value of population/J Factor = 500 000/10869,6 = 46.10 Calculation of J Factor = precision Reliability factor =(0,05 x 500 000)/2.3 =10869,6 Sample interval = total value of PP/Sample size 500 000/46,10 =10845,99 3.5. Ratio analysis will be used by an auditor when performing analytical procedures. During the performance stage an auditor when auditing transactions and account balances, for different classes of transactions NB Analytical procedures are classified as substantive procedures. 3.6. Calculate the following ratios S - The study-notes marketplace Downloaded by: mmatshephod | Distribution of this document is illegal S - The study-notes marketplace DEE 7 3.6.1 Inventory turnover rate /ratio = cost sales/Average invent =(21 000/1100 000) + = 20 There is a remarkable improvement 3.6.3. Gross profit Ratio 2014 (Gross profit)/Sale X 100 = – x 100 =25% 2013 –( X100) =26,67% The gross profit percentage deteriorated during the current year this is attributable to a decline in sales in relation to increase in cost of sales. Q3.7 The short comings on the working Paper -the letter is not dated, does not show dates when it was prepared -it does not contain names of the preparers and reviewers -dates of the reviews -there is no isolation of responsibility no signatures use of signatures by the preparers -it doesn‟t contain the subject matter S - The study-notes marketplace Downloaded by: mmatshephod | Distribution of this document is illegal S - The study-notes marketplace DEE 7 It does not contain significant deficiencies internal controls and the possible effects to the entity -it does not contain audit procedures used to gather sufficient and appropriate evidence. Q 4. Inspect the requisition forms and purchases order for the buyer signature confirms authorization. Inspect the purchases orders once the requisition to confirms whether the goods are of as type used by the company (ii). Select a sample of supporting documentations and trace for orders with material amounts in the purchases journal and the creditors control in the general ledger and trial balance -Inspect the goods received, note last number and confirm whether is it lower than date number (ii) Select a sample of purchase orders and recalculate costs, extensions discounts and vat extensions -reperform edge analysis -compare the opening balances of the individual credits list against the creditors ledger balances and confirm whether there are no significant fluctuations. Question 5 Audit findings Condition Inability to find a correlation between the stock items on the 1st and the sales in either S - The study-notes marketplace Downloaded by: mmatshephod | Distribution of this document is illegal S - The study-notes marketplace DEE 7 branch. -the number of stock write offs, due to obsolete stock at these branches has increased annually at approximately 5% and 3% for both. Criteria Each branch is required to hold tyres and sets of brake pads in stock based on a list sent to the branches annually. Cause The operational managers stated that they were instructed to keep a minimum stock based on a list sent to the branches by the head office Effect The volume of stock on hand is causing operational problems at the two branches. OCT NOV 2014 QUESTION 1 1.1 D 1.2 A 1.3 C 1.4 D 1.5 C 1.6 C 1.7 A S - The study-notes marketplace Downloaded by: mmatshephod | Distribution of this document is illegal S - The study-notes marketplace DEE 7 1.8 A 1.9 B 1.10 B 1.11 C 1.12 C 1.13 C 1.14 B QUESTION 2 2.1 Weakness 2.2 Internal controls 1. Orders are being made without receiving an authorized requisition 1. Orders should be made after receiving authorized requisition, prior to the requisition being made the ordering department should confirm whether the goods are really needed 2.The responsibility of deciding on which new toy line should be ordered is done by Given Khumalo 2. The decision on which new toy lines to order should be designated to a senior personal or senior buyer 3. No supervisory checks are being done on the order to the requisition for accuracy and authority 3. Supervisory checks should be performed by senior buyer, before order can be placed 4. The ordering clerks do not seek quotes from various suppliers when ordering from a supplier who‟s not on the list of approved suppliers 4. The entity should seek quotes from various suppliers when ordering from a non-approved supplier 5. No segregation of duties, as the ordering clerks are performing all the duties 5. The responsibility of making amendments to the Masterfile should be designated to the senior personal / S - The study-notes marketplace Downloaded by: mmatshephod | Distribution of this document is illegal S - The study-notes marketplace DEE 7 manager in the department 6. Senior personal are not frequently reviewing the files, which gave not been cross referenced to the order 6. senior personal should frequently review the files for requisitions which have not been cross referenced. 7. The receiving clerk changes the details on delivery note 7. The receiving clerk can accept goods that are delivered, bit identify such goods clearly on the delivery note, and purchase order, reject all incorrect delivery and clearly identify all rejections 8. The receiving clerk didn‟t perform a superficial test of the condition of the goods received 8. Perform at least a superficial test of the condition of goods received e.g.: broken boxes QUESTION 2.3 1. Attempt to enter a fictitious password and confirm whether it is not accepted (authorization). 2. Attempt to enter a fictitious user ID, and confirm whether it is not accepted (authorization). 3. Attempt to capture the created purchase orders module, leaving out compulsory fields and confirm whether it is not accepted (accuracy and completeness). 4. Observe whether purchase orders have their own numerical sequence (completeness). 5. Attempt to access the credit goods received note, and confirm whether the screen comes up formatted as the goods received notes. QUESTION 3 3.1 RISK 3.2 CONTROL 1. A sale may be made to a customer who is not creditworthy, resulting in loss to the 1. Select a sample of recorded sales, obtain the ISOs and check for a valid S - The study-notes marketplace Downloaded by: mmatshephod | Distribution of this document is illegal S - The study-notes marketplace DEE 7 company. authorising signature of the credit manager. 2. Theft of goods due to inadequate security checks 2.Observe whether gate controller actually checks (counts) goods leaving the premises against the delivery note or invoice . Select a sample of recorded sales; check the delivery note for the date stamp of the security guard and proof of his check. 3. Payments to fictitious employees 3. Select a sample of employees from the wages register and compare the employee‟s signature in the wages register to the signature in the employee‟s personnel file. OR For wages payout, observe the wage payout process. Check that the employee provides proof of identification and sign the wages register as proof of acknowledgment 4. Unauthorized changes in wage rates. Wages fraudulently claimed. 4. Obtain the employee‟s personnel file and check that the payroll amendment form has been signed by the human resources manager 5. Paying unnecessarily high prices for goods 5.Trace a selection of higher value purchases to ensure that quotes have been obtained from a number of suppliers before the purchase was made. 6. Unauthorized loan processed. Financial losses to the company. 6. Obtain a copy of the loan contract and check whether the signatories on the loan contract are those of the persons authorised by the minutes of the general S - The study-notes marketplace Downloaded by: mmatshephod | Distribution of this document is illegal S - The study-notes marketplace DEE 7 meeting to have power of attorney QUSTION 4 4.1.1 Inventory turnover rate: 2014 Cost of Sales/Average inventory (1) = 40 600(½)/22 600 (½) = 1.80 times (1) Inventory turnover has increased. This is to the advantage of the organisation. Stock has been converted into profit more frequently than was the case in 2013. 4.1.2 Average collection period for debtors: 2014 Account receivables turnover = Credit Sales/Average accounts receivables = 62 500(½)/35 650 = 1.75 times Therefore, average collection period = 365/Accounts receivables turnover = 365(½)/1.75 = 208.2 days The increase in collection period of accounts receivable is a big risk for the organisation. The longer the collection period is, the less likely the possibility of receiving that money. In turn, this increases the risk of bad debt and places the S - The study-notes marketplace Downloaded by: mmatshephod | Distribution of this document is illegal S - The study-notes marketplace DEE 7 company‟s cash flow under strain 4.1.3 Gross profit ratio: 2014 Gross profit/Sales x 100 = 29 900(½)/70 500 (½) x 100 = 42.41% The decrease in the gross profit ratio is an important indicator of the organisation‟s results. It may point to a deviation from the selling price policy or may be an error in any of the ratio components.