Exam (elaborations)
2022 AUE3702 MOCK EXAM 2
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TOPICS COVERED: Internal Control Substantive procedures Related Parties
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AuditingTOPICS COVERED: Internal Control
Substantive procedures
Related Parties
, AUE Mock test 2
Reading time: 12 minutes
You are an audit manager at Castle Black Auditors Inc. (Castle Black). You have
been assigned to the audit of Stark Limited (Stark) for the year ended 31 March
2020 with a scheduled audit report date no later than 30 September 2020. Castle
Black have been the auditors of Stark for the past 3 years.
Stark was established many years ago by the Stark family. The Stark family are
still very much involved in the day to day running of the business with
shareholding equally shared by Nod Stark (Father), Rod Stark (Son), Ari Dothraki
(daughter) and Jim Snow (nephew). Stark specialises in the manufacture and
distribution of steel armoury.
Operations
Steel is purchased from Kings Landing (Pty) Ltd (Kings Landing) a company
jointly owned by Ari Dothraki and Nod Stark.
All manufacturing of steel armoury takes place in the Stark arsenal situated
under their head office property. Stark employs 500 armourers who work
Monday to Friday from 8:00 till 17:00 and produce 14 350 pieces of armour on a
weekly basis.
Starks sells the completed armour to its many customers all over the world. Its
biggest customer Nights Watch Limited (Nights Watch) orders a minimum of 8
300 pieces of armour a week and as a result represent the majority of Starks
revenue. Nights Watch provide a private security service and therefore require
sufficient armour to continue to protect the people. Nights Watch is owned and
managed by Jim Snow.
Demand for armour has increased over the past couple of years due to the
impending war of the Walkers, a gang of outcasts with a goal of world
domination.
The increase in demand has put a huge amount of pressure on Stark’s
existing sales and accounting departments respectively and as such Stark
has had to look into automating some of their functions.
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