QUESTION $3$

$(20$ marks$)$

You are the auditor in charge of the audit of Persian Luxuries $($Pty$)$ Ltd $("$Persian Luxuries"$),$ a prominent company specialising in the trade and distribution of luxury textiles in Johannesburg. During the audit, the Audit Senior working on the inventories audit noted inconsistencies in the recorded inventory of textiles. The quantity of the textiles listed on stock records and the general ledger appears excessively high compared to the actual physical count performed.

You received a phone call from a whistle$-$blower who works with Persian Luxuries. The whistle$-$blower, who chose to remain anonymous but identified himself as an employee within Persian Luxuries' logistics department, revealed that the discrepancies in the inventory records were part of a scheme to falsify stock levels. According to the whistle$-$blower, the inflated inventory figures were being used to cover up the diversion of textiles for personal use by a director and Chief Financial Officer $("$CFO$"),$ Cyrus Persia.

Subsequent investigations and additional procedures performed have provided initial evidence supporting the allegations made by the whistle$-$blower. The discrepancies in inventory records have shown patterns consistent with deliberate misstatement, suggesting that the allegations about falsifying stock levels and diverting textiles may be valid.

REQUIRED:

$3\mathrm{.}1.$ Discuss whether the anonymous whistle$-$blower would be eligible for protection in terms of the Companies Act.

$(10$ marks$)$

$101$

HLAA$130-1-$Jan$-$Jun$2025-$FA$2-$PM$-$V$3-17122024$

ANNEXURE I: FORMATIVE ASSESSMENT $2$

$3\mathrm{.}2.$ With reference to the Companies Act, discuss whether there would be any consequences for Cyrus Persia $($CFO$)$ if he is found to have falsified inventory records.

$(9$ marks$)$

$9$

Communication: logical argument

$(1$ mark$)$