Question $2$

You have been tasked with leading the audit team for the year$-$end audit of George Grocers Ltd$,$ a small chain of green grocers with five shops in the Coventry area. The owner, George Green, works closely with each of his store managers and his finance team. The finance team consists of a financial controller and one assistant, who have together prepared year end accounts showing revenue of $\backslash (7\mathrm{.}1\backslash$mathrm$\{$~m$\}\backslash )$ and profits of $\backslash (0\mathrm{.}6\backslash$mathrm$\{$~m$\}\backslash ),$ which is significantly up on last year.

All sales are made by cash, cheque, or debit card, with no debtors on the balance sheet at year end. Each store manager sends a statement detailing sales in the month to the finance team monthly and at year end. It is believed that Gordon Green would like to show the best possible results to obtain further credit from the bank.

Required:

a$)$ Briefly discuss four $(4)$ financial statement assertions relevant for the sales cycle and explain which assertion you think is likely to be the most significant.

b$)$ i$)$ Identify and explain four $(4)$ key controls you would expect to find in George Grocers;

$(8$ marks$)$

ii$)$ Briefly explain which audit tests could be used to verify that these controls are operating effectively.

$(8$ marks$)$

c$)$ Given the owner managed nature of this business, discuss the limitations of testing controls in this audit and whether or not relying entirely on tests of control would be sufficient.