Exam (elaborations)
2022 Mock Exam 4
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- Institution
Topics Covered: The Companies Act The King Code on Corporate Governance IV SAICA Code of Professional Conduct The Auditing Professions Act
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AuditingTOPICS COVERED: The Companies Act
The King Code on Corporate Governance IV
SAICA Code of Professional Conduct
The Auditing Professions Act
AUE Mock Test 4 Reading time: 12 minutes
Background information:
Sani-time (Pty) Ltd (herein referred to as Sani-time) is a leading disinfectant,
sanitizing company in South Africa. They are suppliers of thermal products, foggers
and disinfectants, PPE, liquid and gel sanitizers as well as sanitizing walk through
booths. All solution-based products for foggers and sanitation are locally
manufactured and have the correct MSDS certification. Sani-time work with
businesses, healthcare facilities and schools to prevent the spread of infection.
Financial department:
Sani-time has a financial team of three people headed by Paul Poga CA (SA). Paul
Poga joined the Sani-time team as a junior accountant straight out of his articles 15
years ago. Through hard work and determination he worked his way into the
Financial Director position 5 years ago and continues to thrive in this position. As
the Financial Director he was involved in selecting AuditMe Inc. as auditors 5 years
ago and the firm continues to perform the audit role.
External auditors
, Cassius Clae CA (SA) was appointed as the new audit partner of the Sani-time audit
for the year ending 30 June 2020. The audit team comprises of Cassius Clae (audit
partner), George Hindman CA (SA) (audit manager) and three audit clerks namely
– Ronder Rassi, Claressa Sword and Mike Loosen.
Audit findings
In March 2020 South Africa was hit with a new virus called Coworst19. As a result
of this virus reaching South Africa a nationwide lockdown was enforced and panic
about the spread of the virus ensued. For the first time households were
desperately seeking sanitizers. Sani time spotted an opportunity to reach a new
customer base. An urgent virtual board meeting was called by Paul Poga on 2 April
2020 where the following was discussed:
Paul presented his forecast of revenue to be generated through the sale of
sanitizers to households. His forecast predicted that this new revenue stream
would overtake their revenue derived from all other sources. Mo Sala (CEO) and
Christine Ronaldo (Marketing director and chairman of the board) agreed that they
would be crazy not to commence production of sanitizers for households. Lindiwe
Messi (independent non-executive director) questioned what the associated costs
would be. Paul noted that they would need to secure a supplier of smaller spray
bottles as their current suppliers only produced larger products for businesses and
schools. Paul proposed using HouseHold Bottles (Pty) Ltd a company that
specialises in smaller bottles to be used in households. Paul informed the board
that he would be able to secure preferential prices for the bottles because he was
a great negotiator. All 4 directors of the board voted in favour of Paul signing a long
term contract with HouseHold Bottles.
On 31 May 2020 Sani-time held an online zoom party to celebrate a record month
of sales as a result of their new revenue stream. Invited to the zoom party were all
4 of Sani-time’s directors, George Hindman (Mo Sala’s best friend) and the two
directors of HouseHold Bottles Paul Poga and Tembi Kgatlana. The zoom party was
such a success as it turns out everyone knew each other, in fact George and Tembi
were high school sweethearts. After the zoom party George gave Tembi a call to
catch up. They obviously ended up chatting about the contract between Sani-time
and HouseHold Bottles as George has been very involved in the audit of the
contract.
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