Exam_Memo_Oct_Nov_2009_

Exam_Memo_Oct_Nov_2009_ - -1SUGGESTED SOLUTION OCT / NOV...

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- 1 - - 1 - SUGGESTED SOLUTION OCT / NOV 2009 QUESTION 1 15 MARKS 1.1 A Jackson & Stent (2007: 13/11) 1.2 A Study Guide (P67 – P71) 1.3 B Jackson & Stent (2007: 10/26) 1.4 A Jackson & Stent (2007: 10/39) 1.5 C Jackson & Stent (2007: 14/21) 1.6 B Jackson & Stent (2007: 5/8) 1.7 D Jackson & Stent (2007: 1/15) 1.8 A Jackson & Stent (2007: 10/38 -10/41) 1.9 A Jackson & Stent (2007: 10/33) 1.10 B Study Guide (P18)
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- 2 - - 2 - QUESTION 2 25 MARKS Trade receivables Reference: Jackson & Stent (2007: 10/31) 2.1 Primary risk with trade receivables and why this as a risk in the audit of Maseko Investments (Pty) Ltd 3 marks The primary risk for trade receivables is the risk of overstatement. (1½) Maseko Investments (Pty) Ltd could overstate trade receivables in order to improve the net asset ratio (1½) of the financial statements, OR Maseko Investments (Pty) Ltd struggles to make collections of amounts owed from the sales they made – the balance is already substantially higher than previous years . (1½) (Maximum 3)
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- 3 - - 3 - 2.2 Substantive Procedures to audit credit sales 10 marks Reference: Jackson & Stent (2007: 10/34 – 10/35) Draw a sample of credit sales invoices and compare each with the corresponding order and delivery note in respect of the name of the client, the description and the quantity of goods dispatched. (1½) Inspect the orders selected for approval (1½) by a responsible person. Select documented inventory issued in a case where reliable, continuous inventory records have been kept, and follow them up by examining the corresponding delivery notes and sales invoices (1½). Trace the sales invoices that you have checked to the credit sales journal and confirm that the particulars agree and that the transaction was correctly allocated (1½). Recalculate (1½) the totals of the sales records for selected periods to make certain that postings totals are accurate. Check the postings (1½) of total sales to the credit side of the sales account and individual transactions to the debit side of the accounts receivables account. Perform cut-off tests (1½) on sales invoices and delivery notes to ensure that the transactions were accounted for in the correct accounting period. Calculate the gross profit percentage and compare with prior periods, (or other valid analytical reviews ). (1½) Inspect the number sequence (1½) of the delivery note for missing and duplicate numbers. Compare the amount of the turnover in the income statement with the total of the trial balance and the general ledger. (1½) Reconcile (1½) the list of accounts receivables with the
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- 4 - - 4 - accounts receivables control account and confirm the correctness of the reconciling items. Inspect the accuracy of revenue related adjustments
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This note was uploaded on 03/22/2011 for the course AUE 202M taught by Professor Unknown during the Spring '10 term at University of South Africa.

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Exam_Memo_Oct_Nov_2009_ - -1SUGGESTED SOLUTION OCT / NOV...

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