Exam (elaborations)
2021 AUE3702 MOCK EXAM 2
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Topics covered: Automated controls Test of controls Substantive procedures
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AuditingTOPICS COVERED: Automated controls
Test of controls
Substantive procedures
, AUE Integrated Question test 2 Reading time: 12 minutes
Electronic voting stations (Pty) Ltd (EVS), is a manufacturer of electronic voting
machines. Its factory, warehouse and administration building are located in the same
premises in Cape Town. The company’s year-end is 31 March 2019.
EVS has been profitable since incorporation in 2010. The company sells a generic
product to wholesalers.
In December 2017, EVS was approached by the IEC, Independent Electoral
Commission of South Africa to provide a quote for 5 000 custom electronic voting
machines. These voting machines are to be used in the first pilot study of electronic
voting in South Africa and are therefore required to be ready for the 8 May 2019
elections.
EVS used the services of their electrical engineer, David Becks, to create a prototype
in order to determine the costs to manufacture 1 electronic voting machine.
Raw materials required to build the prototype include the steal casing, screen,
printer and an imported biometric system. A team of 5 staff members were
assembled to build the prototype which took 2 days to complete.
David Becks therefore informed management that an additional 60 staff members
would need to be recruited in order to complete the order in the required amount
of time.
A 10% gross profit margin was then added to the cost in order to determine the
quotation price per electronic voting machine.
The IEC accepted the quote provide by EVS and production on the electronic
voting machines commenced in February 2018. As at 31 March 2019 4 829
custom electronic voting machines had been manufactured and were on hand for
distribution in April 2019.
Disclosure in the notes to the financial statements for inventory reflected the following:
R Million
Raw materials 82
Work in progress 407
Finished goods 1 238
Total inventory 1 727
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