AUI3702 Assignment 2 (ANSWERS) Semester 1 2025 - DISTINCTION GUARANTEED

Well-structured AUI3702 Assignment 2 (ANSWERS) Semester 1 2025 - DISTINCTION GUARANTEED. (DETAILED ANSWERS - DISTINCTION GUARANTEED!)...QUESTION 1 15 MARKS The chief audit executive (CAE) decided that, while you are busy assisting the procurement department, you may as well perform the assurance audit of the procurement function originally scheduled for later in the year. After identifying the risks, you have compiled the following audit objectives to include in your audit programme. I Validity: To determine that only valid purchases are recorded. II Completeness: To determine that all the goods received from suppliers are recorded as purchases in the purchase journal. III Valuation: To determine that the liability in respect of credit purchases is recorded at the correct value. AUI3702/1/2025 3 IV Cut-off: To determine that purchases accounted for in the current period relate only to goods received in the current period. REQUIRED MARKS 1.1 List six (6) planning steps you would need to undertake to properly plan the internal audit of the procurement cycle. (3) 1.2 Describe two (2) audit procedures for each of the audit objectives identified. (12) Maximum 15 Marks QUESTION 2 10 MARKS The audit committee of the South African Civil Aviation Authority has made a request to the chief audit executive (CAE) to perform an internal audit of the tender committee, as it has been identified by the risk department as being a high risk for the organisation. One of the junior internal audit staff members has documented the following information. • Determine that the tender committee has an approved written charter or agreed upon procedures. • Procedures: o Enquire from the secretary and chairperson of the tender committee as to the existence of such a document. Request the charter from the secretary and review. o Review the minutes of board meetings as proof of the fact that the charter has been approved. o Review the composition, purpose and powers of the tender committee and ensure that it complies with the charter requirements. • Results: o The secretary and chairperson informed me that no such document exists. The tender committee operates in a manner deemed appropriate by the chairperson. o Upon review of the board meeting minutes, it was noted that the board felt no charter was necessary as the chairperson of the tender committee is also the chief financial officer and would know what to do. o No charter or agreed upon procedures exists. • No formal approved document governs the operations and existence of the tender committee. REQUIRED MARKS 2.1 List the steps the internal auditor should follow when reporting on an audit engagement. (2.5) 2.2 Analyse the information and compile an internal audit finding based upon the requirements of the IIA Global Standards pertaining to audit findings. (7.5) 4 QUESTION 3 25 MARKS You are the internal auditor in charge of auditing of the audit of EagleEye (Pty) Ltd a company which manufactures security devices, e.g. burglar alarm units, surveillance cameras, etc. Some months prior to the audit, the company appointed Simon Brown as the internal auditor of the company. He reports to Krishen Vather the financial manager. Prior to his appointment as internal auditor, Simon Brown had been an administration clerk in the creditors section. However, due to a restructuring of the creditors section, his position had become redundant, and his options were either to leave the company or accept the newly created post of internal auditor. Although he has no formal training in auditing, Simon Brown is regarded as a competent and enthusiastic staff member who could develop into a satisfactory internal auditor. It has also been decided that, as internal auditor, he could be used effectively if staff members in the accounting department are absent, on annual or sick leave, to carry out their responsibilities. You had considered the possibility of relying on some of the work which Simon Brown had carried out relating to the inventory and production cycle and using him to assist with certain aspects of the year-end inventory audit, but decided at this stage it was not appropriate to do so. In addition to your audit responsibilities, Krishen Vather has requested that you evaluate certain aspects of the production cycle and make recommendations for improvement where necessary. He believes that improvements are required and that the Board would be receptive to reasonable recommendations. He has provided you with the following narrative description: Systems description – production 1. The company manufactures a standard range of products, each of which has its own product code. 2. Manufacture is carried out by ten technicians who each have their own workstation in the factory. The workstation consists of a bench and all the necessary equipment the technician requires to build and test the products. 3. The factory foreman, Frans Flinthoff, is in charge of the factory and reports to the production manager. 4. The sales department notifies the production manager of demands for the company’s products on a weekly basis. (This procedure works well). 5. A large “production blackboard” is positioned at the entrance to the factory. This blackboard displays each workstation number and the name of the technician assigned to that workstation. Below these headings are columns to enter the date, product code and quantity of the product to be manufactured. 6. Each Monday morning the production manager assigns work to the technicians by updating the date, product code and quantity columns on the blackboard. AUI3702/1/2025 5 7. All of the technicians are trained to manufacture all of the company’s products and have an assembly manual to which they can refer if necessary. 8. Components for manufacture are kept in a warehouse adjoining the factory. As technicians generally know what components are needed to manufacture each product (they can also refer to the assembly manual), they will personally select the components from the warehouse shelves as they require them. 9. Once the technician has constructed and thoroughly tested a batch of items, he loads them onto a trolley and takes them to the finished goods warehouse. 10. On arrival at the finished goods store he unloads the items in the receiving area and returns to his workstation. 11. Before the end of each working day a warehouse clerk who is responsible for keeping the components warehouse and finished goods warehouse clean and tidy, takes the items manufactured from the receiving area and places them on the allocated shelves in the warehouse. No perpetual inventory records are maintained. Adapted from Graded Questions on Auditing REQUIRED MARKS 3.1 identify the weaknesses in those aspects of the production cycle described above, and for each weakness make suitable recommendations for improvement. (Do not concern yourself with the costing of manufactured items). Focus on the following areas: 1. Source documentation 2. Controls over component inventory items 3. Segregation of duties 4. Inventory records