Intermediate (23 marks; 41 minutes)

SOURCE: ADAPTED FROM UCT (CAROL CAIRNEY)

You are a university student doing vacation work at an audit rm and you have been assigned to the audit of GreyLine Carriers Ltd.

GreyLine is a transport company specialising in the freighting of chemicals and commercial goods (for example, fresh chickens). The company’s head ofce is situated in Cape Town, while operations are carried out from the 11 branches (four in Gauteng, two in the Western Cape, two in the Eastern Cape, one in Durban and another two in the Northern Cape and Mpumalanga respectively). The company owns a eet of approximately 300 trucks (2XX6 and 2XX7 models), and performs all its own maintenance and repairs from their purpose-built workshop in Durban.

Your task on the audit is to perform an analytical review of the income statement. The rst-year clerk has given you the following instructions: ‘Here’s a copy of the 2XX6 and 2XX7 income statements. Go and chat to the nancial director (FD) about the operations of the company for 2XX7. For each line item on the income statement, obtain reasons why that line item has changed from year to year. Then, for each line item, based on those reasons, recalculate the 2XX7 gure and see if the actual 2XX7 gures make sense and appear reasonable.’