Revenue and receipts cycle Khulula (Pty) Ltd (Khulula) is a South African company that is primarily involved in the manufacturing and selling of clothes. The company has a financial year ending on 28 February 2023. Khulula was previously selling only to the wholesales however, new developments came to sell clothes in retail outlets as well. At the 2022 annual general meeting of Khulula (Pty) Ltd (Khulula) your firm was appointed as the company's registered auditors. A few weeks later Mr Adidas, the majority shareholder, who up until that point, was the managing director and holder of 60% of the issued shares of Khulula (Pty) Ltd, made a surprise announcement that he would be emigrating and that he had just sold all his shares to Nxiba Sports (Pty) Ltd, a subsidiary of a company of a company listed on JSE. In March 2023 Mr. Puma was nominated by Nxiba Sports (Pty) Ltd and duly appointed as Khulula's new managing director. Mr. Puma is politically well connected and played a major role in persuading the Department of Trade and Industry to introduce quotas for imports of clothing from China. He has undertaken to use his influence on lobby for expanding the scope of the quotas. Mr. Puma decided that the business model of Khulula had to be changed as a matter of urgency to focus on retail as well and not just the wholesalers. Accordingly, by the end of August 2023, Khulula had already opened nine retail stores in shopping centres in five provinces across the country to sell the "Team One Bester Dr" branded sportsware directly to the public. Sales are made for cash or on credit. Branch managers are given full autonomy to run the retail outlets, hence they make decisions on the nature and quantities of inventory to be ordered from the Khulula factory and the credit terms that are granted to customers. This is consistent with Mr. Puma's belief that a decentralized management style, with generous rewards and demotion for failure, is effective. All retail outlets have dedicated lines connecting their point-of-sale (POS) systems to Khulula (Pty) Ltd's central server. This enables all transactions to be captured and processed on an online real-time basis. The responsibility for the design and implementation of the network, as well as for making the programme changes required, was outsourced to a small computer firm, Bits and Bytes. Mr. Puma insisted on the appointment of Bits and Bytes in preference to other companies with better 9 Powered by CS CamScanner
skills and more experience. Further investigation revealed that Bits and Bytes is owned and operated by Mr. Puma's uncle, and that the firm urgently needed the business. Long term lease agreements have been entered into with the property administrators of shopping centres from which the retail outlets operate. All equipment used in the retail outlets is leased from Leasehold CC, a close corporation owned jointly by Khulula (Pty) Ltd's financial director and operations manager. Due to cash flow difficulties experienced by Nxiba Sports