FACULTY COMMERCE, MANAGEMENT AND LAW

DEPARTMENT SCHOOL OF ACCOUNTING

SUBJECT AUDITING 2

SUBJECT CODE AUA3871

DATE 9 April 2025

DURATION 90 MINUTES MARKS 50

Assessment 1 – April 2025

Assessor: Mr. Gabriel Haufiku CA(Nam)

INSTRUCTIONS TO STUDENTS:

1. This question paper consists of Three (3) questions.

2. Answer all the questions.
3. Start each question on a new page.
4. You are reminded that answers may NOT be written in pencil or erasable pen.
5. The marks shown against the requirement(s) for each question should be taken as an indication of
the expected length and the required depth of the answer.
6. Answer the questions using:
• Appropriate arrangement and presentation;
• Clarity of explanation;
• Logical arguments; and
• Clear and concise language
7. Non-programmable calculators are allowed.
8. All books must be handed in.
9. Round off to the nearest Namibian Dollar, unless otherwise stipulated in a question.
10. Assume that all amounts are material except where the contrary is stated.
11. This question paper consists of Six (6) pages including the cover.

Page 1 of 6
Question 1

Vice_Presi_Dent Ltd (hereafter VPD) is a company incorporated in Namibia. VPD is listed on the
Namibian Stock Exchange, with a reporting yearend of 30 June. They operate as a retailer in Namibia.
VPD has retail shops across the country. The key products they sell to their customers include
household items such as cleaning materials, food, cosmetics etc.

Competition in the retail sector has increased significantly. One needs to do their utmost best to stay
in business.

VPD’s Chief Executive Officer (CEO) is Mrs. Beauty Ashipala. She has been the company’s CEO since
incorporation about 5 years ago. During the 2025 reporting period (30 June 2025), VPD decided to
take their staff/employees on a training seminar. The main item on the training agenda was Corporate
Governance in Namibia, focusing on the role of the boards and directors.

VPD’s executive management were so excited about this training seminar. It was at this seminar that
they learnt about the existence of NamCode of Good Corporate Governance in Namibia.

The company’s shareholders are:

• Mr. Andrew Bean – owns 10% of the company’s equity.

• Mr. Alan Harper – owns 10% of the company’s equity.
• Mr. Charley Sheen – owns 10% of the company’s equity.
• Mrs. Beauty Ashipala – owns 7.5% of the company’s equity (CEO)
• Mr. Dan Ashipala – owns 7.5% of the company’s equity (husband to the CEO)
• Other shareholders – 55% of the company’s equity.

The company currently does not have a Nominations committee, and they would like to establish this
committee.

VPD’s Board of Directors consists of:

• Mrs. Beauty Ashipala: Executive Director (CEO) and Chairperson of the Board.
• Mr. Dan Ashipala: Non-Executive Director
• Mr. Alan Harper: Non-Executive Director
• Mr. Andrew Bean: Non-Executive Director
• Mr. Paulus Shikongo: Independent Non-Executive Director

The proposed composition of the Nominations committee is as follows:

• Mrs. Beauty Ashipala (Chairperson)

• Mr. Charley Sheen (Non-Executive Director)

Other matters:

• During the year, VPD intentionally sold expired food items to its customers at one of its stores
in Kunene region. It was only picked up when community members started getting sick and
asked the Health Inspector to do an investigation into the matter. The matter escalated and it
was concluded that VPD should pay for medical expenses for the affected community
members for a period of 2 years, estimated to amount to N$5 million.

Page 2 of 6
Required:

(a) Identify and provide suggestions for the improvement of VPD’s corporate governance
practices/concerns according to the NamCode (18 marks)

Provide your answers in a tabular format as follows:

Corporate Governance Issue Recommended practices

Presentation and layout: 2 marks

Total marks: 20 marks

Page 3 of 6
Question 2:

You are assigned to the audit of VPD Limited, the same entity you performed work on corporate
governance above. The Chief Financial Officer (CFO) was impressed by your work and is excited to
have you on the audit team.

The CFO was particularly keen on the audit team to pay specific attention to the revenue cycle, as she
has noted a decline in revenue year-on-year and is particularly worried about controls around revenue
completeness and occurrence. She is not so good with IFRS 15 Revenue and needs your assistance.

Revenue and Receipt Cycle:

1. Customers can place their orders through electronic mail, which is received by the senior
accounts clerk and the financial accountant’s secretary. They immediately hand all sales orders
to the debtor’s clerk. All sales are on credit.

2. The debtors clerk inspects whether the ordered goods are in stock. If they are not the debtors
clerk phones the customer to tell him that he must re-order at a later date.

3. If the goods are on hand, he immediately prepares a multi-coloured internal sales order, which
is used as follows:
a. Pink copy – sent to the warehouse as an instruction for the warehouse manager to
move the required goods to the dispatch section.
b. Green copy – kept by the debtor’s clerk until delivery has taken place. When delivery
has taken place, he prepares an invoice which is then sent to the accounts clerk to post
to the sales journal.

4. On receipt of the goods from the warehouse and the pink copy of the internal sales order, the
dispatch section prepares a multi-coloured delivery note which is used as follows:
a. Yellow copy – sent with the goods to the customer. This copy is kept by the customer.
b. Blue copy – also sent with the goods to the customer. This copy is signed by the
customer and returned to the debtor’s clerk.
c. White copy – kept by the dispatch section for delivery queries.

5. A gate controller ensures that there is a delivery note for every consignment of goods leaving
the premises.

6. On receipt of the signed copy of the delivery note, the debtors clerk prepares a duplicate
invoice. He agrees the quantity on the invoice to the delivery note, agrees the price to the
authorised pricelist and inspects the casting and accuracy of the invoice. He will alter the invoice
if necessary and send one copy of the invoice to the debtor. The debtors clerk then raises the
sale in the customer’s account in the debtor’s ledger and sends the other copy of the invoice
to the accounts clerk who posts it to the sales journal.

7. The cash book clerk who receives the cheques for payment hands the cheques to the debtor’s
clerk. He enters the amount paid in the customer’s account in the debtors’ ledger from the
cheques. He then gives the cheques to the cashier for banking.

Page 4 of 6
 8. All debtors’ queries on invoice errors and goods returned are dealt with by the debtor’s clerk.
He liaises with the debtor and where necessary prepares credit notes and posts them to the
debtors’ ledger.

9. At the end of each month the debtors clerk prepares, from the debtor’s ledger, statements for
all debtors. While preparing the statements he notes any debtors who are behind with their
payments and stamps the statement “overdue” in red. If they have not paid within 6 months
from the time of becoming overdue, he writes them off in terms of the company policy.

10. At the end of the month the debtors clerk also prepares a listing of debtors, plus a list of debtor’s
adjustments for the month, which he gives to the general ledger clerk who reconciles the listing
with the debtors control account.

Required:

(a) Identify and explain the weaknesses in the revenue and receipt cycle of VPD Limited
(18 marks)

Communication marks: 2
Total: 20 marks

Page 5 of 6
Question 3:

You recently attended an auditing lecture on performing audit procedures on trade payables. The
lecture happened on 7 April 2025. Your lecturer was impressed with your participation and has
therefore presented you with the following information relating to a supplier who was selected for
testing for the year ended 31 December 2024 for a certain company.

Creditors reconciliation: ABC Suppliers Ltd

Note Amount (N$)

Balance as per ABC Suppliers Ltd statement 1 December 2024 236 910
Less: Incorrect invoice Note 1 62 105
174 805
Add: Undercharge of ABC Suppliers Ltd invoice Note 2 18 000
Add: Purchase not reflected Note 3 60 555
Balance as per creditors ledger at 31 December 2024 253 360

Note 1: This invoice is for goods never ordered or received by the company and invoiced in
November 2024.

Note 2: This undercharge resulted from no Value-Added Tax (VAT) being charged by the company on
invoice CCC3.

Note 3: ABC suppliers invoice reflecting the charge for the goods received in respect of GRN 22
(dated 28 December) and only received on 5 January 2025.

Required:

• Describe the substantive procedures you will perform on ABC Suppliers Ltd’s creditors
reconciliation at 31 December 2024. (10 Marks)

>>>END<<<

Page 6 of 6