UNIVERSITY OF ZULULAND University of Zululand, Private Bag X1001, KwaDlangezwa, 3886 W: www.unizulu.ac.za FACULTY OF COMMERCE, ADMINISTRATION & LAW DEPARTMENT OF ACCOUNTING AND AUDITING WEEK 2: Auditing the Cycles: Revenue Tutorial - 2022 CAUD302, CADD302, 2AUD302 & 2AUT302 - AUDITING 3B Question 2 has been adapted from the Auditing Fundamentals - Graded Question book by Hamel & Kunz (Chapter 6). Remember Control Objectives relate to Validity, Accuracy & Completeness (VAC). These are objectives that when achieved will lead into the prevention, detection and/or correction of errors and fraud (misstatements) in the AFS. Key Controls are those that are selected by the Auditor on the clients' system of internal controls - that the Auditor wants to place reliance in his performance of the audit tests. The Test of Controls (ToC) is the actual audit approach that the Auditor has selected to gather audit evidence. I call the ToC as the "indirect" way in which the auditor gathers audit evidence about the amounts that are reflected in the AFS. This is because, the Auditor does not directly verify (through audit tests) the figures in the AFS and the underlying accounting records but rather gains comfort about the appropriateness of the figures through testing the controls that produce the figures in the AFS. Remember that the figures in the AFS and the related accounting records are derived from and produced by the System of Internal Controls. Question 1: Control Objectives, Key Controls & Test of Controls [SEEN] You are a senior in charge at "Don't be late"inc "DBL, a firm of Registered Auditors , and you have been assigned to the 31 December 2020 year-end audit of Shesha Limited, a large diversified industrial company. JIT Couriers: Revenue System JIT Couriers is one of the largest division of Shesha Ltd and operates a courier service for small and medium enterprises. To obtain audit evidence about the assertions relating to revenue and accounts receivables, you intend to place to place as much reliance as possible on the system of internal control for revenue. Accordingly, your firm's computer audit specialists have reviewed the general computer controls at JIT Couriers and have indicated that; · The computer system operated on a wide area network (WAN) that links all computers at the regional depots to the head office. · The general computer controls operated effectively throughout the 2020 financial year, and . The software used by JIT Couriers was developed by a third-party vendor and as such the source code is not accessible to the division. No program changes were made during the 2020 financial year.
JIT Couriers have provided you with the following description of the revenue system: Ref. Procedures and controls 1 In all instances where specific employees are assigned to capture data, unique ID's and passwords are used to ensure that only those employees are able to capture the data onto the computer system. 2 Any small or medium enterprise that wishes to use the services of JIT Couriers is directed to the regional customer