Exam (elaborations)
AUE2602 EXAM PACK 2023
- Institution
- University Of South Africa
AUE2602 EXAM PACK 2023
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THIS PAPER CONSISTS OF SEVEN (7) PAGES.
This paper consists of the following questions and main topics:
QUESTION MAIN TOPIC MARKS
1 Corporate governance, internal controls and the acquisitions and 50 payments
cycle
2 Internal controls, revenue and receipts cycle, acquisition and 50 payments cycle,
inventory and production cycle, payroll and
personnel cycle and finance and investment cycle
100
NOTE:
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-2- AUE2602
October/November 2018
Although the primary purpose of the examination is to test your knowledge and application of the
subject matter, your ability to organise and present such knowledge in written language of an
acceptable standard will be taken into consideration by the examiners.
QUESTION 1 50 MARKS
Modern Closets Limited is a large manufacturing company situated in Johannesburg, South Africa. They
specialise in the design and construction of closets and cabinets for private or commercial use. The
company was started in 1987 by Mr Jay and is currently considering whether it should list on the
Johannesburg Stock Exchange (JSE).
The board of directors
Mr Jay Chairperson of the board. Mr Jay was the Chief Executive Officer of Modern Closets for 20
years, but retired last year.
Ms Claire Chief Executive Officer (CEO) and CA(SA). Ms Claire is the daughter of Mr Jay.
Mr Mitch Chief Operating Officer (COO) and qualified lawyer. Mr Mitch is the son of Mr Jay.
Mrs Gloria Non-executive director and married to Mr Jay.
Mr Cam Non-executive director who currently has 1% shareholding in Modern Closets.
Mr Phil Non-executive director with no relationship with the other directors or officers of Modern
Closets.
Ms Lilly Non-executive director and partner in the legal firm that assists Modern Closets in their
business.
Mr Jay was never too concerned about the corporate governance of the company as he had a very handson
approach to running the business. However, Ms Claire wants to ensure that Modern Closets is following the
recommendations of the King IV Report with regard to ethical leadership.
Ms Claire also knows that her father has never appointed board committees and is concerned that they can no
longer just explain why. She wants to appoint the required board committees as soon as possible.
Internal controls
Mr Jay is not a fan of the computerised systems that have been implemented at Modern Closets over the past
few years. As such, he has never used some of the built-in functionalities. Now that Ms Claire is the CEO, she
knows that the software has different functions and can generate different reports, which can be used to her
advantage. However, she is unsure what they relate to and what would be useful to her.
She knows that the internal audit team always wants to link the controls to the control objectives being
occurrence and authorisation, accuracy and completeness.
She is specifically interested in the following control and report functionalities of the software:
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a. Audit trails
b. Mandatory fields
c. Override reports
d. Validation checks
e. Activity reports
f. Sequence checks
g. Valid character and sign checks
Acquisitions and payments
Owing to the way Mr Jay ran the business, Modern Closets has always made payments by way of physical
cheques. Mr Mitch is in the process of implementing a computerised system that would make EFT payments
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