AUDT221 Examination 1st opportunity – 2016 (Suggested solution)

QUESTION 1 (8 MARKS)
1.1 Identify and explain three (3) weaknesses in the “invoicing function” as well as the Commented [11]: Weaknesses are control activities that
“recording of sales function” of Ackerwomans’ income and receipt cycle, as evident aren’t in place or not working as they should (“no / not”).
If a weaknesses is written with a “should / must / etc.” –
from the system description above incorrect – NO MARKS WILL BE GIVEN. This represents a
control activity and not a weakness.
Identify weakness Explain weakness Commented [12]: Students need to identify the weakness by
The invoice clerk (Minki) did not check This could lead to invoices being writing it in a negative format – if they write it in a positive
format or a recommendation format - NO MARKS WILL BE
the prices quoted to the customer on the inaccurately prepared / misstated. GIVEN.
ISO against official price lists and Commented [13]: Explaining a weakness means – more
detail on the weakness or a possible risk. NO
discount schedules. (1) (1) recommendations.
The supervisor (Jo-Ann) did not check This could lead to invoices being
the customer details on the invoice. (1) inaccurately prepared / misstated. (1)
The supervisor (Jo-Ann) did not sign the There is no isolation of responsibility
invoice after the control activities where or proof of procedures being
performed. (1) performed. (1)
The independent staff member (Peggy- This could lead to invoices being
Sue), does not compare the customer inaccurately entered in the sales
name and amount in the sales journal to journal.
the invoice. (1) (1)
Minki does not sign the invoice as proof There is no isolation of responsibility
that her control activities have been or proof of procedures being
performed. (1) performed. (1)
Peggy-Sue does not sign the invoice or There is no isolation of responsibility
the sales journal as proof that her control or proof of procedures being
activities have been performed. (1) performed. (1)
Rolien does not sign the records as There is no isolation of responsibility
proof that her control activities have been or proof of procedures being
performed. (1) performed. (1)
Available marks 7 Available marks 4
Maximum marks 3 Maximum marks 3
COMMUNICATION MARK – presented in format above (1) Commented [14]: Please remember to give the
communication mark if it is in a table format.
Maximum marks 7

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 1/19

1.2 Name one (1) possible risk that could be present in the “receipts / cashier function” of Commented [15]: Risks are from the business’ point of view
Ackerwomans’ income and receipt cycle – possible consequences because of a weakness.

Payments received may not be banked due to theft or carelessness or fraud. (1)
Available marks 1
Maximum marks 1

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 2/19

QUESTION 2 (12 MARKS)
2.1 Formulate five (5) test of controls you would carry out to confirm that all sales are made Commented [16]: The only options for verbs with tests of
to account holders, by only referring to the information provided above. controls are “Inspect”, “Enquire”, “Observe” or “Re-perform”.
NOT “check” / “look” / “ask” / “kyk” / “vra”).
For reasons (why) – no marks will be given for “to check”/ “to
Control provided in question Test of control see” / “to ask” / “to look”).
No orders are accepted if the Enquire from the order clerk about what the process Commented [17]: Procedures need to have three things –
customer is not an approved HOW (verb), WHAT (document / person / process) and WHY
he/she follows to ensure that only orders from accepted (1) (reason). A lot of students write these tests of controls only in
customer, e.g. no account customers are taken. short words – it needs to have all 3 things above.
number. When a customer Commented [18]: This is an application question – student
places their order, the order clerk Observe the order clerk taking an order to confirm that the MUST apply knowledge by referring to the information
provided in the question (controls given in the question).
will check the approved customer order clerk checks that the customer is on the approved (1) NO MARKS FOR any other control tests – these are not
list to determine if the customer is customer list. applicable to the information in the question.
an approved customer.

Inspect a sample of ISO’s and re-perform the control by

agreeing the customer number on the ISO to the list of (1)
approved customers.

Before the order is processed, the Enquire from the credit controller about what the process
credit controller from the sales
(1)
he/she follows before an order is approved.
authorisation department will
establish that the customer has
not supplied fictitious details and Inspect a sample of ISO’s for the signature of the credit
that the customer’s credit status is controller as proof that he/she has performed the
satisfactory by referring to the (1)
necessary control activities and that the sale has been
customer’s details on file. The authorised.
credit controller will then authorise
the sale by signing the ISO.
Instances where an order is Observe the credit controller in order to confirm whether
placed by a prospective customer, he/she checks that the customer has not supplied fictitious
the following credit application (1)
details and that their credit status is satisfactory before
procedures should first be signing the ISO.
performed before the order is
Inspect a sample of credit application forms to confirm that
filled:
the customer has supplied the necessary details and that (1)
 The credit application form the terms and limits were set.
must request the customer
to provide banking details,
trade references as well as
income and expenditure
details;
 The credit controller must
Inspect a sample of credit application forms for the
follow up by contacting
trade references and credit signature of the financial manager as proof that the (1)
bureaux and assess the customer has been approved to buy on credit.
customer’s liquidity; and
 Terms and limits must be
set by the credit controller
and then approved by the
financial manager.

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 3/19

Other Enquire from management/personnel whether these
control procedures were applied consistently throughout (1)
the year.
Enquire from management / personnel about the
procedures followed when one of the employees is sick. (1)

Available marks 9
Maximum marks 5

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 4/19

2.2 Describe the substantive procedures that you will perform on the revenue amount of Commented [19]: Some of the options for verbs with
R15 000 000 at 31 August 2016 to confirm the cut-off assertion. substantive procedures are “Inspect”, “Enquire”, “Recalculate”,
Re-perform”, etc.
NOT “check” / “look” / “ask” / “kyk” / “vra” / “see” – NO MARKS
Obtain last numbers of the last used Sales invoice and Delivery notes until 31/08/2016. (1) WILL BE GIVEN).
For reasons (why) – NO MARKS will be given for “to check”/
Agree the last used numbers of SI and DN to the sales journal to confirm that it has been “to see” / “to ask” / “to look”).
recorded before year-end. (1)
Sequence test the sales journal, e.g. the last the last two weeks of sales invoice before
year-end for any missing invoice numbers. (1)
Scrutinise the subsequent month’s sales journal for any invoice numbers lower than the
cut-off number. (1)
Select a sample of sales invoices before 31/08/2016 and trace them back to the DN and
inspect the delivery date to confirm that the goods were delivered before year-end and a
sale transection recognised. (1)
For a sample of invoices 2 weeks after year-end trace them back to DN to confirm that
the goods were delivered after year-end (31/08/2016) hence raised the following financial
year. (1)
At the conclusion of the inventory count, document the last document numbers (goods
received notes and sales invoices) on the working papers (1)
Available marks 7
Maximum marks 4

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 5/19

2.3 Describe additional substantive procedures that you will conduct relating to the account Commented [110]: Some of the options for verbs with
receivable balance of R6 536 265 at 31 August 2016, to confirm the existence of the substantive procedures are “Inspect”, “Enquire”, “Recalculate”,
Re-perform”, etc.
debtors. You are only required to consider existence assertion. NOT “check” / “look” / “ask” / “kyk” / “vra” / “see” – NO MARKS
WILL BE GIVEN).
For reasons (why) – NO MARKS will be given for “to check”/
Perform subsequent receipts tests by: “to see” / “to ask” / “to look”).
 Select a sample of debtors from the year-end debtors list (1) Commented [111]: Some students might only say “perform
 From the debtors selected, inspect the CRJ to determine if there was any a subsequent receipt test”, without further explaining it. In that
case we can give them 1 mark for that.
payment received from selected debtors after year-end. (1)
Contact debtor telephonically / personal visit. (1)
Confirmation of signed credit invoice / credit application form through inspection. (1)
Inspect the delivery notes for the signature of the clients to confirm that the debtors has
received the goods and exists. (1)
Perform 2nd circularisation. (1)
Available marks 6
Maximum marks 3

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 6/19

QUESTION 3 (6 MARKS)
3.1 Identify any weaknesses in the “payment preparation function” of AK grocer’s purchase Commented [112]: Weaknesses are control activities that
and payment cycle, as evident from the information above. aren’t in place or not working as they should (“no / not”).
If a weaknesses is written with a “should / must / etc.” –
For each weakness identified, provide a recommendation that will improve the purchase incorrect – NO MARKS WILL BE GIVEN. This represents a
and payment cycle of AK grocer. control activity and not a weakness.
Commented [113]: Students need to identify the weakness
Weakness Recommendation by writing it in a negative format – if they write it in a positive
format or a recommendation format - NO MARKS WILL BE
The individual creditors’ ledger The individual creditors’ accounts in the GIVEN.
account is not reconciled with the creditors’ ledger should be reconciled with Commented [114]: NO marks for:
monthly creditor’s statements sent the monthly creditors’ statements sent by “supporting documents not cancelled by cheque signatory”
or
by the suppliers. the suppliers to ensure that no payments “cheque signatories did not agree details before payments
are made to fictitious creditors or incorrect were made”
These form part of the ACTUAL PAYMENT function, which
(1) amounts. (1) was not asked. Only the PAYMENT PREPARATION function
was asked.
The blank cheque requisitions are The blank cheque requisitions should not
Commented [115]: Recommendations are things that
not subject to sound stationery be kept in a box on his desk, but be locked SHOULD / MUST be implemented (“must / should / is
controls. away and kept safe in order to ensure that supposed to / etc.”).
(1) no unauthorised payments are made. (1)
There is only one cheque signatory There should be at least two cheque
and not two. (1) signatories for all cheque payments. (1)
No second review or authorisation of There should be a review or a second
the of the cheque requisition. authorisation procedures by another
employee to ensure that it is accurate and
(1) valid. (1)
Available marks 8
Maximum marks 4

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 7/19

3.2 Name two (2) possible risks that could be present in the “actual payment and recording Commented [116]: Risks are from the business’ point of
function” of AK grocer, after the cheque requisition has been given to the cheque signatory view – possible consequences because of a weakness.

Cheques may be incorrectly made out (e.g. wrong payee / amount) (1)
Invalid payments may be made (e.g. fictitious creditors / overpayments) (1)
Payments may be recorded inaccurately (errors) (1)
Payments may be intentionally misstated to hide fraud. (1)
Payments get delayed and are not paid in time (1)
Available marks 5
Maximum marks 2

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 8/19

QUESTION 4 (12 MARKS)
4.1 Formulate five (5) test of controls that you would perform on purchases as described in Commented [117]: The only options for verbs with tests of
the system description, to confirm that these purchases are valid and authorised. controls are “Inspect”, “Enquire”, “Observe” or “Re-perform”.
NOT “check” / “look” / “ask” / “kyk” / “vra”).
For reasons (why) – no marks will be given for “to check”/ “to
Control provided in question Test of control see” / “to ask” / “to look”).
The purchase requisition form is sent to Enquire from the purchase order clerk as to what Commented [118]: Procedures need to have three things –
the order clerk in the ordering procedure is followed for placing an order if there is HOW (verb), WHAT (document / person / process) and WHY
department. (reason). A lot of students write these tests of controls only in
no purchase requisition e.g. verbal instruction to short words – it needs to have all 3 things above.
place an order. (1) Commented [119]: This is an application question – student
 Before an order clerk can place a Inspection a sample of PO’s for the authorising MUST apply knowledge by referring to the information
provided in the question (controls given in the question).
purchase order (PO) for the signature of the order manager. (1) NO MARKS FOR any other control tests – these are not
required goods, the purchasing Inspect a sample of PO’s to confirm that the applicable to the information in the question.
manager will: supplier appears on the list of approved suppliers (1)
 Check the PO to the
purchase requisition form
for accuracy.
 Review the PO for the
reasonableness of the
Re-perform the control by comparing a sample of
price and quantity and
ensure that the supplier
PO’s to the order requisitions for accuracy and
is on the list of valid completeness.
suppliers.
 Sign the PO as proof of
procedures performed.
(1)
The receiving area is physically secured
and only employees working in the Observe whether the receiving area is physical
receiving department can gain access to secure with proper access controls.
the area. (1)
 On arrival of the ordered goods, Enquire from the receiving clerk as to what
the goods receiving clerk will: procedures are followed when goods ordered from
 Compare the supplier suppliers are delivered to the company’s receiving
delivery note to the department. (1)
relevant PO.
Obtain a sample of matched PO’s, supplier delivery
 Check the quantity and
notes and GRN and
description of the goods
delivered against the PO  Inspect it for the signature of the receiving
and the supplier delivery clerk
note.  Re-perform the procedure performed by the
 Amend the PO and receiving clerk by comparing the quantity (1)
supplier delivery note for and description on the PO, supplier’s (1)
all incorrect deliveries
delivery note and GRN.
received.
 Make out a goods
receive note (GRN)
according to the goods
that was actually
Observe the procedures which are carried out by
received. the goods receiving clerk when a delivery is
 Sign the PO, supplier received from a supplier.
delivery note and GRN
as proof of procedures
performed.
(1)

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 9/19

Other Enquire from management/personnel whether
these control procedures were applied consistently
throughout the year. (1)
Enquire from management / personnel about the
procedures followed when one of the employees is
sick. (1)
Available marks 11
Maximum marks 5

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 10/19

4.2 Describe the additional substantive audit procedures that you would perform on the Commented [120]: Some of the options for verbs with
creditor’s reconciliation of Stainless Steel SA (Pty) Ltd. substantive procedures are “Inspect”, “Enquire”, “Recalculate”,
Re-perform”, etc.
NOT “check” / “look” / “ask” / “kyk” / “vra” / “see” – NO MARKS
By inspection of the Stainless Steel (Pty) Ltd statement, confirm that: WILL BE GIVEN).
For reasons (why) – NO MARKS will be given for “to check”/
 Date of statement is 30/06/2016. (1) “to see” / “to ask” / “to look”).
 Balance owing is R1 250 800 as reflected on the reconciliation. (1)
Commented [121]: This is an application question – student
Goods returned MUST apply knowledge, by referring to the information
provided in the question (amounts, document numbers, dates,
By inspection of the Stainless Steel SA (Pty) Ltd.’s June 2016 statement, confirm that (1) etc.). NO MARKS FOR just dumping “theoretical” procedures
invoice 2345 has been included in the balance owing.
Obtain We Build SA (Pty) Ltd.’s GR528 and confirm:
 the date the goods were delivered on is 27/06/2016. (1)
 That the supplier was Stainless Steel SA (Pty) Ltd (1)
Compare the description of goods to We Build SA (Pty) Ltd.’s PO and supplier’s invoice
2345 to confirm that incorrect goods was delivered (1)
By inspection of invoice 2345 confirm that the value of incorrect goods returned was
R380 150. (1)
Inspect goods returned note for the signature of Stainless Steel SA (Pty) Ltd.’s official
acknowledging receipt of the returned goods as evidence that return took place on
29 June 2016 not prior to 30 June 2016. (1)
Invoice 2586
By inspection of the Stainless Steel SA (Pty) Ltd.’s June 2016 statement, confirm that
(1)
invoice 2586 has been included in the balance owing.
Inspect the dates on the Stainless Steel SA (Pty) Ltd.’s delivery note and the (1)
corresponding We Build SA (Pty) Ltd goods received note 9872 to confirm that delivery
only took place on the 5 July 2016 (ie after year-end).
Inspect invoice 2586 to confirm that it is for an amount of R523 805. (1) 3. Inspect invoice 2586 to confirm that it is for an am
Available marks 11
Maximum marks 7

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 11/19

QUESTION 5 (9 MARKS)
5.1 Briefly discuss any weaknesses in the year–end inventory count, based on only the Commented [122]: Students need to identify the weakness
information given above. Your answer should refer to the planning and preparation of by writing it in a negative format – if they write it in a positive
format or a recommendation format - NO MARKS WILL BE
the inventory as well as the count stationery. GIVEN.
Commented [123]: Weaknesses are control activities that
Planning and preparation aren’t in place or not working as they should (“no / not”).
The method of counting was inadequate; no tag system or double count was mentioned If a weaknesses is written with a “should / must / etc.” –
incorrect – NO MARKS WILL BE GIVEN. This represents a
(method of counting not identified). (1) control activity and not a weakness.
As counters choose their own counting bays, there is no method to verify that all of the Commented [124]: Information was only given for planning
and preparation and counting stationery – NO MARKS for
inventory will be counted. (1) during or after the inventory count.
Counting was not done in teams of whom one was independent of the warehouse (1)
function.
No floorplan was drafted or handed out to identify count areas for the count teams. (1)
Counting stationery
The inventory sheets did not have the following as minimum required information:
 Columns for second count (1)
 Discrepancies, (1)
 Categories (1)
 Location of inventory (1)
There is no document (tag or similar) to identify the count details per item e.g. quantity. (1)
There are no inventory adjustment forms on which count differences. (1)
Adjustments / results of investigation can be entered for authorization before the
inventory records are adjusted. (no authorisation for adjustments) (1)
Quantities were shown on the inventory sheets, and not left blank, which could cause
counters to fraudulently count to the goods to match these quantities. (1)
Available marks 12
Maximum marks 7

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 12/19

5.2 Name the financial statement assertions applicable to the inventory balance which will
be affected by the following:

5.2.1 Existence (0.5)

If the theft has not been discovered, no write off of the inventory stolen will have been
made in the perpetual inventory records. This means that the records include inventory
that does not exist. (0.5)
5.2.1 Valuation and allocation (0.5)
If the stolen inventory is not identified the value will include this and there is a risk that it
has not been written off / down. (0.5)
5.2.2 Rights and obligations (0.5)
As the company does not own the inventory, it does not have the “right” to include the
consignment inventory in its inventory account balance. (0.5)
Available marks 3
Maximum marks 2

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 13/19

QUESTION 6 (6 MARKS)
6.1 Describe the substantive audit procedures that you will perform in respect of the Commented [125]: Some of the options for verbs with
valuation and allocation assertion of inventory, by only referring to the cost of local substantive procedures are “Inspect”, “Enquire”, “Recalculate”,
Re-perform”, etc.
purchases and the lower of cost or net realisable value. NOT “check” / “look” / “ask” / “kyk” / “vra” / “see” – NO MARKS
WILL BE GIVEN).
Cost of local purchases For reasons (why) – NO MARKS will be given for “to check”/
“to see” / “to ask” / “to look”).
 For selected items from the inventory valuation list, test as follows:
* Inspect corresponding supplier invoice to determine if the cost price is the same (1)
* Enquire from management which valuation method is used on inventory to
determine if it complies with IAS 2 (1)
* Re-perform the inventory valuation by using the client’s cost formula and
compare the result to that of management (and follow up if there are any
exceptions with management) (1)
Lower of cost or net realisable value
 For a selection of inventory items, ensure the sales prices are correct by (1)
inspection of price lists.
 For a selection of inventory items, ensure the sales prices are correct by
inspection of most recent sales invoices used. (1)
 Inspection of the inventory valuation list to identify items where the sales prices
are lower than the cost prices (1)
 Inspection of a selection of sales invoices after year end to determine if the sales
prices are higher than the cost prices. (1)
Available marks 7
Maximum marks 6

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 14/19

QUESTION 7 (17 MARKS)
7.1 Identify the weaknesses in the above payroll cycle. For each weakness identified, Commented [126]: Weaknesses are control activities that
provide the possible risk that relates to the weakness. Only focus your answer on the aren’t in place or not working as they should (“no / not”).
If a weaknesses is written with a “should / must / etc.” –
information provided above. incorrect – NO MARKS WILL BE GIVEN. This represents a
control activity and not a weakness.
Weakness Risks
Commented [127]: Students need to identify the weakness
1. Changes made to employees pay 1. It will not be possible to trace if an by writing it in a negative format – if they write it in a positive
format or a recommendation format - NO MARKS WILL BE
rates are not done in writing as the increase was authorised and who GIVEN.
department head simply phones the approved the increase of an employees’ Commented [128]: Risks are from the business’ point of
HR department and informs them of wage rate. view – possible consequences because of a weakness.
the increase / Commented [129]: Only risks were asked – NO MARKS for
This could lead to unauthorised
There is weak isolation of any explanations or recommendations.
increases\incorrect increases to wage
responsibilities as it will not be
worker monthly payments.
possible to trace which manager
(1) (1)
approved the increase.
2. Access is not controlled at the farm 2. There is a risk that employees can:
as there is only 1 entrance and check-
 Check in and leave directly after
in is not supervised by the security
guard. checking in / OR (1)
 Check in for another employee /
OR
This will lead to employees being paid for
(1)
hours not actually worked
3. The wage admin clerk does not 3. There is a risk that invalid employees
agree the number of daily clock cards can be paid \ employees will not be paid
(1)
with the employee list. (1) for hours worked.
4. The wage admin clerk does not 4. The batching system will be ineffective
divide the daily clock cards in which can lead to mistakes being made
workable batches. 100 clock cards per regarding hours worked and incorrect
batch is not workable. wages paid to employees. / OR
This can also lead to unhappy
(1) employees / strikes / loss of workforce. (1)
5. As the department manager do not 5. This could lead to employees working
take part in the wage process, there is unauthorised / unnecessary overtime
no: which would lead to unnecessary high
wage expenses.
 Authorisation of overtime by a
department head prior to it
being worked. / OR
 Calculations on the clock card
batches is not checked for
accuracy (1)
(1)
6. There is no isolation of 6. In the event of an error / mistake
responsibilities regarding batching as regarding the calculation of wages it
the wage admin clerk does not sign would be impossible to trace the person
the batch control sheet as proof of responsible.
procedures performed.
There is a risk that the batch controls will
not be performed and Roché’s Petals will
(1) (1)
not know whom to hold responsible.

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 15/19

7. There is no entry of the batch 7. The batches received by the wage
control sheets into a batch register. / (1) clerk will not be compared to the entry in
The wage clerk does not sign a batch the wage register for completeness and
register. accuracy.
This can lead to not all wage batches
(1)
being processed by the wage clerk.

8. Changes made to the employees’ 8. This could lead to unauthorised

pay rates are not done on a pre- increases\incorrect increases to wage
printed, sequentially numbered PAF worker monthly payments as well as
as all changes are done verbally over inaccurate records.
(1)
the phone. (1)
Available marks 8 Available marks 8
Maximum marks 7 Maximum marks 7

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 16/19

7.2 List the control activities that the paymaster and department head should perform at the Commented [130]: Control activities are things that
conclusion of the wage pay-out in respect of unclaimed wage packets that are not SHOULD / MUST be performed in this specific function (“must
/ should / is supposed to / etc.”).
collected by wage employees.
Commented [131]: ONLY at the conclusion of the wage
The paymaster and department head should: pay-out – NO MARKS for any control activities that needs to
take place after the wage pay-out (e.g. locking away the
Agree all unclaimed wage packets to the payroll (employees who have not signed the list) (1) packets).
Identify clearly on the payroll, all employees for whom there is unclaimed packets (1)
Enter the details of unclaimed wages in an unclaimed wage register (1)
Sign the payroll to acknowledge this control procedures (1)
Available marks 4
Maximum marks 3

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 17/19

QUESTION 8 (5 MARKS)
8.1 Describe the audit procedures that you will perform before and during the attendance of Commented [132]: Some of the options for verbs with
the wage pay-out, as part of the payroll and personnel cycle of Construction SA substantive procedures are “Inspect”, “Enquire”, “Recalculate”,
Re-perform”, etc.
NOT “check” / “look” / “ask” / “kyk” / “vra” / “see” – NO MARKS
Before the wage pay-out: WILL BE GIVEN).
Compare the quantity of pay packets and details of a sample of pay packets with the (1) For reasons (why) – NO MARKS will be given for “to check”/
“to see” / “to ask” / “to look”).
payroll statement
Commented [133]: ONLY before and during the auditor’s
Re-perform the calculation of payroll. (1) attendance were asked.
Inspect the bank statement to determine if an amount per the payroll corresponds to the
cheque amount of the wage (1)
During the wage pay-out:
Observe the following procedures during the wage pay-out.
 Pay-out did take place with two personnel being present (the supervisor and
paymaster) (1)
 Employees identified themselves by means of an employee card or ID (1)
 Employees sign the payroll register as proof of receipt (1)
 Employees count their pay packs in front of postmaster and report any
discrepancies. (1) Commented [134]: Students can’t just write these to get the
marks, it needs to be linked to “OBSERVE”
 Employees not allowed to collect paybacks on behalf of others. (1)
Available marks 8
Maximum marks 5

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 18/19

QUESTION 9 (5 MARKS)
9.1 Describe the substantive audit procedures that you would perform on the loan amount Commented [135]: Some of the options for verbs with
at 30 September 2016 in order to verify the accuracy and the occurrence thereof substantive procedures are “Inspect”, “Enquire”, “Recalculate”,
Re-perform”, etc.
NOT “check” / “look” / “ask” / “kyk” / “vra” / “see” – NO MARKS
Occurrence WILL BE GIVEN).
Inspect the Memorandum of Incorporation (MOI) of the entity to determine the regulations (1) For reasons (why) – NO MARKS will be given for “to check”/
“to see” / “to ask” / “to look”).
of the company (terms and conditions).
Inspect the loan agreement and determine the parties to the agreement, the amount of
the loan, the payment terms and the interest rate applicable. (1)
Inspect the bank statement to determine if the credit was received that corresponds to
the loan amount in the loan agreement; (1)
Inspect the minutes of meeting of the directors meeting where the loan application was
approved. (1)
Accuracy
Re-perform the allocation of the payments between capital and interests amounts (1)
Re-perform the mathematical calculations to determine the short term portion of the loan (1)
Re-perform the mathematical calculation of the transaction for the year (opening balance
+ plus receipts – payments ) (1)
Obtain confirmation directly from third parties (loaners) of the balances outstanding on
year-end and compare to those in the general ledger. (1)
Available marks 8
Maximum marks 5

TOTAL: 80 MARKS

AUDT221 EXAMINATION 1ST OPPORTUNITY - SUGGESTED SOLUTION 2016 19/19