Part C one question only (20 marks) Case study Vertigo Ltd (Vertigo) is a manufacturer of fine quality sporting gear; they have been trading for over 35 years and they sell to a wide variety of customers including wholesale suppliers as well as direct to a range of companies such as department stores, specialist sporting retailers as well as direct to sports clubs across Australia including to a number of professional sporting clubs. The companys year-end is 30 June 2013. The company has a large manufacturing plant, warehouses in all states and a head office (Sydney). Upon manufacture, the products are stored in one of the warehouses until they are despatched to customers. The company does not have an internal audit department. Sales ordering, goods despatched and invoicing (centralised from Sydney) Undergraduate Program HA3032 Auditing 3 Each customer has a unique customer account number and this is used to enter sales orders when they are received in writing from customers. The orders are entered by an order clerk and the system automatically checks that the goods are available and that the order will not take the customer over their credit limit. For new customers, the sales manager completes a credit application; this is checked through a credit agency and a credit limit entered into the system by the credit controller. The company has a price list, which is updated twice a year. Larger customers are entitled to a discount of between 2.5% to12.5% this is agreed by the sales director and set up within the customer master file. Once the order is entered an acceptance is automatically sent to the customer by mail/email confirming the goods ordered and a likely despatch date. The order is then sorted by address of customer. The warehouse closest to the customer receives the order electronically and a despatch list and sequentially numbered goods despatch notes (GDNs) are automatically generated. The warehouse team pack the goods from the despatch list and, before they are sent out, a second member of the team double checks the despatch list to the GDN, which accompanies the goods. Once despatched, a copy of the GDN is sent to the accounts team at head office and a sequentially numbered sales invoice is raised and checked to the GDN. Periodically a computer sequence check is performed for any missing sales invoice numbers. Required: read the case study carefully and; (a) Recommend five (5) tests of controls the auditor would normally carry out on the sales system of Construct, and explain the objective for each test. (10 marks) (b) Describe five (5) substantive procedures the auditor should perform to confirm Vertigos yearend receivables balance.