AUE3761 ASSIGNMENT 3 OF 2020
QUESTION 1
a) Risk of material misstatement at the assertion level relating to revenue for
the year ended 30 June 2020
There is a risk that the amount charged per hour on service contracts for
photograph services is calculated using a rate different from the one set at the
company`s annual general meeting;
There is a risk that revenue received from international clients might not be
properly converted into Rands in the financial statements. There is a risk of
converting the foreign revenue at the wrong exchange rate;
At year end, there is a risk that deposit fees received are recognised as
revenue before the related performance obligation has been fulfilled by the
entity;
There is a risk that revenue might be recorded at the gross amount before
deducting 10% trade discount for balances paid seven days or more prior to
the wedding date;
There is a risk that finance income relating to 10% interest chargeable from
the first day after the wedding date on outstanding balances might be wrongly
allocated to revenue;
There is a risk that revenue relating to products might be recognised before
the transfer of control to the clients;
There is a risk that the total fee might be calculated without including all of
wedding rate, travel fee and product fee;
There is a risk that the kilometres travelled between the wedding venue and
MRU offices might not be accurately determined when determining the travel
fee to be included in revenue;
There is a risk that the number of photographers used in the calculation of
revenue might not be recorded accurately resulting in misstatement of
revenue; and
There is a risk that settlement discount of 5% might not be deducted from
revenue for balances settled seven days or less prior to wedding date.
, b) Automated controls that MRU should have in place to ensure that
information captured on the Memoir software is valid, accurate and
complete
Field Name of automated Description of automated control
control
Wedding Date Mandatory Field Processing should not continue without
entering the date of the transaction.
Missing data checks This is performed to ensure that the system can
detect and alert the user if the date has not
been filled in.
Contract Number Field size tests The Memoir software should test the field size
of the contract number, for example, if the
number should have eight characters, the
system should reject contract numbers with
less than or more than the required
characters.
Alphanumeric checks Checks if the number contains a combination of
alphabet letters for the first three letters of the
client surname and the numerals for the month
and year of the wedding date in the respective
fields.
Wedding duration Limit checks This is a check to ensure that the maximum
allowable 10 hours is not exceeded. An attempt
to input more than 10 hours will be rejected by
the system.
Alphanumeric checks Since this represents the number of
photography service hours for one
photographer, there should be a check to
ensure that the field is only made up of
numerals. Any attempt to enter alphabets will
be automatically rejected.
Travel fee Shading of fields Certain fields are shaded so that the user will
not be able to alter them. For example, the
standard
Limit checks Checks whether travel, subsistence of the
wedding photographer is only charged for
wedding venues falling outside a 50km radius
of the company`s offices.
Control totals Record counts, hash totals from input are
compared to record count and hash totals after
processing.
QUESTION 1
a) Risk of material misstatement at the assertion level relating to revenue for
the year ended 30 June 2020
There is a risk that the amount charged per hour on service contracts for
photograph services is calculated using a rate different from the one set at the
company`s annual general meeting;
There is a risk that revenue received from international clients might not be
properly converted into Rands in the financial statements. There is a risk of
converting the foreign revenue at the wrong exchange rate;
At year end, there is a risk that deposit fees received are recognised as
revenue before the related performance obligation has been fulfilled by the
entity;
There is a risk that revenue might be recorded at the gross amount before
deducting 10% trade discount for balances paid seven days or more prior to
the wedding date;
There is a risk that finance income relating to 10% interest chargeable from
the first day after the wedding date on outstanding balances might be wrongly
allocated to revenue;
There is a risk that revenue relating to products might be recognised before
the transfer of control to the clients;
There is a risk that the total fee might be calculated without including all of
wedding rate, travel fee and product fee;
There is a risk that the kilometres travelled between the wedding venue and
MRU offices might not be accurately determined when determining the travel
fee to be included in revenue;
There is a risk that the number of photographers used in the calculation of
revenue might not be recorded accurately resulting in misstatement of
revenue; and
There is a risk that settlement discount of 5% might not be deducted from
revenue for balances settled seven days or less prior to wedding date.
, b) Automated controls that MRU should have in place to ensure that
information captured on the Memoir software is valid, accurate and
complete
Field Name of automated Description of automated control
control
Wedding Date Mandatory Field Processing should not continue without
entering the date of the transaction.
Missing data checks This is performed to ensure that the system can
detect and alert the user if the date has not
been filled in.
Contract Number Field size tests The Memoir software should test the field size
of the contract number, for example, if the
number should have eight characters, the
system should reject contract numbers with
less than or more than the required
characters.
Alphanumeric checks Checks if the number contains a combination of
alphabet letters for the first three letters of the
client surname and the numerals for the month
and year of the wedding date in the respective
fields.
Wedding duration Limit checks This is a check to ensure that the maximum
allowable 10 hours is not exceeded. An attempt
to input more than 10 hours will be rejected by
the system.
Alphanumeric checks Since this represents the number of
photography service hours for one
photographer, there should be a check to
ensure that the field is only made up of
numerals. Any attempt to enter alphabets will
be automatically rejected.
Travel fee Shading of fields Certain fields are shaded so that the user will
not be able to alter them. For example, the
standard
Limit checks Checks whether travel, subsistence of the
wedding photographer is only charged for
wedding venues falling outside a 50km radius
of the company`s offices.
Control totals Record counts, hash totals from input are
compared to record count and hash totals after
processing.
