AUDITING 3B OCTOBER 2017 FINAL EXAM UNIVERSITY OF ZULULAND RESTRUCTURED FOR RELEVANCE FACULTY OF COMMERCE, ADMINISTRATION AND LAW DEPARTMENT OF ACCOUNTING AND AUDITING Auditing 3B (CADD 302 and CAUD 302) October 2017 Examination Duration: 180 minutes Total marks: 120 Internal Examiner: Mr MC Gwala CA(SA) Internal Moderator: Mr JD Chambers CA(SA) External Moderator: Ms S West CA(SA) - UCT Instructions to candidates 1. This paper consists of 2 questions (set out on pages 2 to 6). Ensure that your paper is complete. Question 1 60 marks 90 minutes Question 2 60 marks 90 minutes Total 120 marks 180 minutes 2. Answer each question in a separate answer book and clearly identify the question answered on the cover of the answer book. 3. Fill in all the details as required on the front of each answer book handed in. 4. Use only blue or black ink. Do not write in pencil; pencil-written work will not be marked. 5. On completion, insert all answer books in numerical order under the cover of the answer book for Question 1. 6. Work neatly and logically. A maximum of 10% of the marks will be awarded for communication skills (language, clarity of style, presentation, logical and well-constructed answers). 7. In answering the questions, record any assumptions you may consider necessary. No questions will be answered by invigilators during the exam. 1
AUDITING 3B OCTOBER 2017 FINAL EXAM Question 1 60 marks (90 minutes) You are a third year trainee auditor on the audit of Siyalima Agricultural Cooperation Limited (SAC), a farming and agricultural product processing company started by young farmers from the north of KwaZulu- Natal (KZN) eleven years ago. The young farmers who are all alumni of the University of Zululand realised that they all have a passion for working the soil and decided to invest the little savings they had at the time and worked tirelessly to create what is now one of the more prominent farming businesses in KZN, supplying fresh produce to all nine provinces in South Africa. The financial year of SAC ended on 30 June 2017 (FY2017). Being a third year trainee has come with some supervisory responsibilities as you are expected to guide the audit team and report to the manager on the progress of the audit. The audit team has completed the review of the internal controls over accounting systems of SAC and found these to be satisfactory. The audit team was concerned about the management of liabilities and it was clear that the young farmers wish to limit liabilities in their statement of financial position and are willing to do anything to reduce these. As they continue to grow their business, they continue to seek debt funding (or equity should this be available) from external providers and they are aware that one of the key considerations by providers is how they are managing their debt. Farms near Port Shepstone Three years ago SAC purchased two farms in the south of KZN near Port Shepstone at a