QUESTION $2(65$ marks$)$

BACKGROUND

Accounting systems and internal controls

M$4$U uses an off$-$the$-$shelf accounting package, AccDr. AccDr processes value$-$added tax, has a built$-$in inventory management system, and offers users a choice between perpetual and periodic inventory systems. M$4$U makes use of the regular inventory system. The supplier of AccDr provides free support for five hours per month, and changes to the system can only be made by the software supplier.

The finance function consists of the following individuals:

$$ Financial controller, Mary Calitz ACMA, CGMA

$$ Senior accountant, Themba Cele CA$($SA$)$

$$ Accountant responsible for sales and tax, Tasneem Mohammed CA$($SA$)$

$$ Zama Khumalo, a second$-$year part$-$time student in chartered accountancy. She was appointed in August $2021$ to assist with managing the purchasing process and creditors.

M$4$U utilises a recruitment agency to select their employees. The recruitment agency hires suitable individuals with appropriate personal qualities, experience, and qualifications in consultation with line management.

All employees undergo induction and training on the company$$s policies and procedures. The AccDr supplier also trains new employees to orient them on the new system. All new employees have a $3-$month probation period in which they are supervised by their line manager or another employee on correctly using the computer system. The supplier of AccDr also reviews the system to record any unusual network activity.

Purchases cycle

The purchasing and receiving team consist of the following staff members:

$$ Head of Purchasing $$ Leruo Mabaso

$$ Ten buyers

$$ Two purchasing clerks: Brian Mashishi and Peterlia Dlamini

$$ Four receiving clerks

Important master documents

$$ List of approved suppliers

$$ Standard price list

MAC$4866/2024$

$8$

When a new supplier is considered, Leruo presents the supplier$$s details to Robert and Keegan. The approved supplier and standard price lists are updated once she supports them.

M$4$U makes use of three categories of suppliers.

$$ Category $1$: Fresh fruit and vegetables: The ten buyers visit and negotiate with local farmers twice weekly to ensure better prices and optimal quality of seasonal produce. If the required items are unavailable from the local farmers, they are sourced from retail stores at significantly higher prices. All fresh fruit and vegetables are paid for in cash.

$$ Category $2$: Meat, grains, spices, sauces, dairy, and other ingredients: M$4$U has fixed contracts with suppliers. M$4$U negotiates the prices of products with its suppliers every month, and standard price lists are updated as soon as negotiations have been completed.

$$ Category $3$: Packaging and logistics: All packaging materials are imported from Beijing Pack Ltd $($Pack$),$ a supplier based in China. In terms of the contract, Pack pays the shipping costs on behalf of M$4$U when handing the goods to the courier and then adds the transport cost, plus a $10\%$ service fee, to its invoice to M$4$U$.$

Placing of orders

The ordering function on AccDr is password protected, and only Brian and Peterlia have access to this module. To initiate an order, the purchasing clerk responsible for placing the relevant order $($either Brian or Peterlia$)$ enters their username and password, consisting of at least eight characters. The same purchasing clerk then enters the supplier code from the approved supplier list.

A standard order form appears on the screen once the supplier code has been entered into the system. The form includes standard details such as the supplier$$s e$-$mail address, business phone number, physical address and credit terms negotiated with the supplier. The relevant purchasing clerk compares these details with the list of approved suppliers. The purchasing clerk next selects the description of the items to be ordered from a pre$-$populated drop$-$down menu and types in the order quantity. The product code and price are displayed automatically after selecting the relevant item from the list.

The responsible purchasing clerk compares these particulars with the most recently updated standard price list. The system automatically calculates the total amount of the order, and the purchasing clerk re$-$performs the calculation to determine the full value of the order before releasing the order to the supplier by clicking the $$confirm order$$ button.

Brian pulls a report listing all orders with no matching goods received notes $($GRNs$)$ from AccDr every week and follows up on any outstanding orders

$9$

Delivery of goods

All items are delivered to a dedicated receiving area. When receiving category $2$ and $3$ items, two of the four receiving clerks compare the quantity and description of the physical products with the delivery note received from the supplier and the original order form. The same receiving clerk checks the quality of the products, after which one of them completes a GRN on AccDr, indicating the quantity and description of the goods received. Both receiving clerks sign the form elec