QUESTION $3$

$(20$ MARKS$)$

At Paws & Whiskers Pet Supplies $($Pty$)$ Ltd$,$ a brick$-$and$-$mortar pet shop specializing in pet food, accessories, and small animals, the sales process begins when a customer selects their items and brings them to the checkout counter. A cashier scans each item using the point$-$of$-$sale $($POS$)$ system, which automatically applies the correct price based on the shop's inventory database. If a customer is purchasing a high$-$value item, such as a custom$-$built aquarium or an exotic pet, the system prompts the cashier to request manager approval before proceeding with the transaction.

Once all items are scanned, the POS system calculates the total amount due, and the customer can

choose to pay by card or cash. If paying by card, the system requires the transaction to be processed through an integrated card reader, which generates a receipt only upon successful authorization. If paying in cash, the cashier must count the money received and input the amount into the POS system, which then calculates and displays the correct change. At the end of each shift, cashiers reconcile their cash drawer against the POS sales report, and any discrepancies must be documented and reported to the store manager for review.

Every transaction generates a unique receipt, which is automatically printed and provided to the customer. The system also retains a digital copy of all receipts, ensuring sales records are maintained accurately. Refunds and returns are only processed with a valid receipt, and require authorization from a store manager, who verifies the reason for the return before approving the transaction in the system. The returned items are then checked for quality, and if resellable, they are returned to inventory; otherwise, they are recorded as damaged stock.

The store's inventory is updated in real time with each sale, ensuring stock levels remain accurate. If an item falls below the predetermined reorder threshold, the system flags it for replenishment, prompting staff to review stock levels and place an order with suppliers if necessary. At the end of each business day, the store manager reviews the daily sales report and investigates any unusual transactions, such as excessive voided sales or discounts applied without corresponding authorization.

You are required to:

$3\mathrm{.}1$ Based on the above information regarding the revenue cycle of Paws & Whiskers Pet Supplies $($Pty$)$ Ltd:

$3\mathrm{.}1\mathrm{.}1$ Identify the key controls present in the revenue cycle.

$(7$ Marks$)$

$3\mathrm{.}1\mathrm{.}2$ Explain for each key control identified what risk this control lowers to an acceptable level.

$(7$ Marks$)$

$3\mathrm{.}1\mathrm{.}3$ Formulate the tests of control you will perform when testing the identified key controls.

$(6$ Marks$)$

Present your answer using the following structure:

$\backslash$table$[[$Key Controls Identified,Risk Lowered to Acceptable Level,Tests of Control$],[$List the key control identified.,Explain what risk the control lowers to an acceptable level $($e$.$g$.,$ what would go wrong if the control was not present$).,$List the test of control you will perform to test the identified control.$]]$