Read the $senario$ below and answer the questions that follow.

Extract from the Revenue Cycle Description for CleanWorks $(Pty)Ltd$

The revenue cycle $at$ CleanWorks $(Pty)Ltd$ begins when a client places $an$ order for cleaning services.

Orders are initiated $by$ the sales team, who receive requests via phone, email, $or$ through the company's

online portal. Once $an$ order $is$ received, the sales representative $logs$ the details into the Customer

Relationship Management $(CRM)$ system, ensuring that all relevant information, such $as$ client contact

details, service type, and frequency, $is$ accurately recorded.

A sales order $is$ then generated and reviewed $by$ the sales manager for approval $to$ confirm that all client

information $is$ complete and accurate. After the sales manager's approval, the sales order $is$ forwarded $to$

the scheduling department. The scheduling team assigns cleaning staff $to$ the job based $on$ availability

and location, and then updates the $CRM$ system $to$ reflect the scheduled service.

Once the cleaning service $is$ performed, the team leader $on-$site completes a service confirmation form,

detailing the work done and any issues encountered. This form $is$ signed $by$ the client $to$ acknowledge

that the service has been completed $to$ their satisfaction. The completed service confirmation form $is$ then

sent $to$ the billing department.

The billing department generates $an$ invoice based $on$ the service confirmation form and the initial sales

order. Before the invoice $is$ sent $to$ the client, $itis$ reviewed $by$ the billing supervisor $to$ ensure accuracy

and completeness. The invoice $is$ then emailed $to$ the client with a request for payment within $30$ days.

Payments received from clients are processed $by$ the accounts receivable clerk. All payments are

recorded $in$ the accounting system, and a daily reconciliation $is$ performed $to$ ensure that all cash receipts

are accurately posted. The accounts receivable aging report $is$ reviewed weekly $by$ the finance manager

$to$ identify any overdue accounts. Follow$-up$ actions are initiated for overdue accounts $to$ ensure timely

collection.

$At$ the end $of$ each month, the financial controller reviews the revenue and accounts receivable reports,

comparing them $to$ the expected cash flows and budget forecasts. Any discrepancies are investigated

and resolved promptly $to$ ensure the accuracy $of$ financial reporting.

QUESTION $1(25$ MARKS$)$

You are a senior trainee $on$ the audit $of$ CleanWorks $(Pty)Ltd,$ a company that provides monthly

professional cleaning services $to$ offices, apartment blocks, and holiday resorts. The existence $of$

accounts receivables has been identified $as$ a high$-$risk area.

$As$ part $of$ your $on-$the$-$job training, you are responsible for coaching a first$-$year audit trainee.

You are required $to$:

$1\mathrm{.}1$ Explain $to$ the trainee two major procedures used for existence testing for trade receivables.

Use the following format $to$ structure your answer:

$(4$ Marks$)$

Name $of$ procedure Explanation

List the name $of$ the procedure. Explain how and why the procedure $is$ performed.

$1\mathrm{.}2$ Explain $to$ the trainee how a debtors circulation $is$ performed. $(3$ Marks$)$

$1\mathrm{.}3$ Apart from the existence assertion, explain $to$ the trainee which other assertions relate $to$ the

accounts receivable balance.

Use the following format $to$ structure your answer:

Assertion Name Explanation

List the name $of$ the

assertion.

Explain what the assertion means $in$ the context $of$ auditing the accounts

receivable balance.

$(8$ Marks$)$

Present your answer $to$ question $1\mathrm{.}4$ and $1\mathrm{.}5in$ the following format:

Identified Control Risk lowered $to$ acceptable level

List the key control

identified.

Explain what risk the control lowers $toan$ acceptable level, $e.g$ what would $go$

wrong $if$ the control was not present.

$1\mathrm{.}4$ Identify the key controls present $in$ the extract from the revenue cycle Description for CleanWorks

$(Pty)Ltd.$

$(5$ Marks$)$

$1\mathrm{.}5$ Explain, for each key control identified, what risk this control lowers $toan$ acceptable level. $(5$ Marks$)$