FACULTY OF MANAGEMENT SCIENCES

DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE

QUALIFICATION : BACHELOR OF CHARTERED ACCOUNTING (07BACC)

COURSE CODE: AUD621S COURSE NAME: AUDITING 200

DATE: 16 October 2021 PAPER: THEORY

READING TIME: 15 MINUTES

MARKS: 75
WRITING TIME: 98 MINUTES

TEST 2 QUESTION PAPER

EXAMINER Ms. W. Gertze

MODERATOR: Ms. D. Jesaya

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 INSTRUCTIONS

1. This paper consists of SIX pages including the cover page. If your paper does not
contain all the pages, please put up your hand so that a replacement paper can be
handed to you.
2. Answer all the questions.
3. Answer each question on a separate page/ sheet.
4. Calculate the reading time that you should spend on each question by multiplying
the number of marks for each question by 0,2 to determine the time, in minutes,
available for each question. You may make notes on your question paper during
the reading time but may not write in your answer booklet.
5. Calculate the writing time that you should spend on each question by multiplying
the number of marks for each question by 1,3 to determine the time, in minutes,
available for each question.
6. Delete all (even single open lines) open spaces on your answer sheets with pen.
Pages on your answer sheets that contain open spaces will be marked as such
and those pages will not be eligible for a remark.
7. No tippex or pencil may be used on your answer sheets. Pages on your answer
sheets that contain pencil or tippex will be marked as such and will not be eligible
for a remark.
8. Keep this paper for your record purposes.
9. The neatness, disclosure and presentation of your answers will be taken into
account when marking your paper.
10. Read questions carefully and adhere to any suggested format in presenting
your solution, if you need to provide explanations you should always use full
sentences, refrain from simply naming facts.

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QUESTION 1 75 MARKS
You are part of the audit team of Audit4U, the newly appointed auditors of SecureIT (Pty) Ltd
(hereafter “SIT”) for the financial year ended 30 June 2021 (‘FY2021’).

Background information of the client

The appointment comes as welcomed news, as SIT is garnering a lot of investor attention,
both locally and internationally and an application for NSX listing has already been submitted.
SIT is a rapidly growing company in the information technology (IT) sector and offers cyber
security services to its clients in addition to providing the latest cyber security devices and
related accessories. With the work from home trend emerging during the global pandemic,
many companies have realised staff mobility is the new normal and are seeking safe digital
platforms that will allow their staff to connect to the office network remotely, upload documents,
process confidential information and send emails securely. SIT has been growing steadily over
the years but has experienced exponential growth since 2020.

The management of SIT are very busy with research and new innovations in the emerging
technologies sector, and therefore do not have a big focus on finances and legislation. They
leave the financial decision-making powers to the Financial Director (FD), Mr Beukes, who is
under immense pressure due to the increasing workload. Staff morale is quite low amongst
the finance team as they are overworked and are subject to the autocratic management style
of Mr Beukes. Of late, Mr Beukes is even more stressed following a call from the bank who
demanded audited financial statements by end of July 2021, in order to secure ongoing
finance. Your audit team was hastily brought as there were unresolved disputes with the
previous auditors. Mr Beukes has already indicated to you that he expects the auditors to be
fully responsible for their compliance with laws and regulations and prevent all fraud and
error.

The following working papers are available:

Work Paper Work Paper Description

Reference
A100 Audit matters: Various accounts
B200 System description

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Client: SecureIT (Pty) Ltd Period end: 30 June 2021
Prepared by: T.Rainee Date: 08 July 2021
A100
Reviewed by: Date:
Audit matters: Various Accounts
1. Inventory

Extract of account balances as at 30 June 2021:

Inventory balance N$ 13 400 000

Provision for Obsolete/Slow moving stock N$ 850 000

Procedures that you as the auditor completed with regards to the inventory count:

1. Observed the client’s count teams perform the cycle counts during the interim audit.
2. Selected a sample of cable spare parts in the warehouse during the year-end inventory
count and traced them to the perpetual inventory records.
3. Inspected the draft annual financial statements for compliance with the disclosure
requirement of the Companies Act and IFRS.
4. Reviewed the minutes of directors’ meetings to determine whether inventory is
encumbered in any way.
5. Obtained a letter from various third parties confirming that they held inventory on
consignment on behalf of SIT. The letters listed all inventory they had held at reporting
date.
During the year end inventory count, inventory amounting to N$194 901 was located in the
warehouse, however, it did not appear on the perpetual inventory system but it was included
on the inventory list. Mr Beukes provided no explanation as “the inventory is there!”

2. Bank confirmation
The responsibility of obtaining bank confirmations was assigned to the first year trainee. Three
weeks after the confirmation has been sent to the bank and no confirmation has been received
back, one of the third years followed up on the matter. The bank indicated that they sent the
bank confirmation last week already. They did not receive any instruction from the first year
as to where the confirmation needs to be sent and have sent it to the financial manager
directly.

3. Fixed assets

SIT generally buy their vehicles via bank financing. Company vehicles are used by IT
technicians when they service their clients, both around the capital and the remaining regions.
Management decided to increase their fleet of vehicles by another 2 in order to keep up with

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 the demand. Since it is a legal requirement for all vehicles on Namibian roads to undergo a
road worthy test, SIT sends their vehicles for a road worthy test every year.

Client: SecureIT (Pty) Ltd Period end: 30 June 2021

Prepared by: T.Rainee Date: 22 June 2021
B200
Reviewed by: Date:
System description

To: Trainee@Audit4U.com.na

From: admin@SecureIT.com.na

Date: 21 June 2021

Subject: System description – SecureIT

Good afternoon,

Please see below the system description for SecureIT as you have requested.

- SIT makes use of a fully computerized system

- The system used by SIT has been developed for us specifically and SIT’s income is
driven by system calculations
- All requests / bookings for services are received through the website.
- Customers are required to complete all the necessary information in order for the
system to generate a quote.
- A quote is valid for 5 calendar days and the customer must click on the “accept”
button on the quote to proceed with the booking.
- Once the customer has clicked on the “accept” button, the computer system will
generate an invoice and send it to the customer.

Additional information you might need:

- Since we are only five IT staff members employed full time, we only have one
password and username between us. It’s easier this way.
- Even though we all have “Job descriptions” on paper, we all do a bit of everything.
John, the supervisor, however, is the only one that will make changes to the system
when requested.
- John will make changes to the system whenever we request it, irrespective of the
format in which it is requested.
- Once a month he will send an email to management giving a high level feedback on
the changes he made and why they were made (The feedback will be based on what
he can remember as we seldom put things in writing. We are after all only five staff
members in the IT office).

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 - When a client makes use of our services for the first time, we create a Masterfile for
them where we put their personal information and register them as regulars or
general – this will impact the pricing structure.
- Each package has its own set of masterfiles and all calculations are based on a
masterfiles. For example: the charge out rate per hour per service type, the VAT
charge, the admin fee, the accommodation / fuel charges for out of town clients.
- Changes to these files can be made by anyone as there is no specific password
needed to make changes.
- We see ourselves as all being equal and therefore no one has to approve any
Masterfile changes to charge out rates, customer information or system changes.

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