CALC (Pty) Ltd is a bookstore store with branches across South Africa. The company

expanded operations during the financial year to include stationery and a "prescribed

handbook" division.

The following additional information is provided by the auditee:

CALC (Pty) Ltd opened two new branches during the financial year.

On 5 December 2022, the financial manager of CALC (Pty)Ltd was suspended pending

an investigation due to suspected fraud. The previous audit manager, the brother of the

financial manager, refuses to share prior audit files and information.

On 1 October 2022 a total of 1500 handbooks were ordered and invoiced from

Knowledge Ltd. for a total of $63 150. The handbooks were shipped on 6 October 2022

when the exchange rate was R12.68/$.

The goods arrived in South Africa on 13 November 2022 and the SARS return reported

the transaction inclusive of VAT to the value of R104 445 and customs duty of R40 037.

The goods were shipped to the CALC (Pty) Ltd head office on 23 November 2022 for an

additional transport cost of R6 850. The transport company was paid in advance as they

operate strictly on a cash basis.

On delivery of the handbooks at head office on 8 December 2022 a goods received note

was signed by the receptionist and the invoice from Knowledge Ltd, payable on 31

January 2023 was accepted. The delayed payment terms are considered normal trading

arrangements with the supplier.

Trade payables reported on the financial statements for the year ended 31 December

2022 amounts to R855 420 with a comparative of R1 362 530. The client provides the

creditors listing, the age analysis, the creditors ledger, the creditors control account, the

supplier statements, the invoices and payment confirmations, the orders and the

correspondence files.

On 31 December 2022, the trade payables consisted of 23 individual creditor accounts.

On 31 December 2021, the balance comprised 26 accounts. CALC (Pty) Ltd has only

one foreign creditor.

CALC (Pty) is a registered VAT vendor and reports all transactions in terms of the

International Financial Reporting Standards. You have been assigned to the regulatory

audit of CALC (Pty) Ltd for the year ended 31 December 2022 and the engagement

partner allocated the Trade Payables section to you.

Required

1.1 Formulate the risk assessment that should have been prepared on the

acceptance of CALC (Pty) Ltd as a client.

(40)

1.2 Develop the substantive audit procedures you need to perform to obtain sufficient

and appropriate audit evidence to confirm the valuation, the classification and the

completeness of the trade payables disclosed on the financial statements for the

year ended 31 December 2022.

(60)