Smart$-$Pack $($Pty$)$ Ltd $($Smart$-$Pack$)$ was incorporated in January $2010$ by Alicia Florrick and her husband, Peter Florrick. Smart$-$Pack is a privately owned South African company, with Alicia as the Chief Executive Officer and Peter as the Chief Financial Officer. Neither Alicia nor Peter are chartered accountants, but both have extensive experience in running successful businesses. The company has three non$-$executive directors on the Board of Directors. The company$$s head office is situated in the Waterfall Business Park in Johannesburg, with a manufacturing plant and warehouse in the neighbouring city of Germiston. Over the years, Smart$-$Pack has grown rapidly to become a medium$-$sized manufacturing company that supplies various forms of packaging solutions such as plastic shopping bags, cardboard boxes, crates and polystyrene bases to its wide and established customer base. To aggressively grow sales, Smart$-$Pack successfully expanded its business into sub$-$Saharan Africa $($predominantly Lesotho and Botswana$)$ during January $2018.$ Smart$-$Pack is registered for value$-$added tax $($VAT$)$ as a category C vendor. The previous auditor resigned on $16$ November $2018$ with immediate effect, due to irreconcilable differences between the engagement partner and the Smart$-$Pack Board. This related to the audit fees that were charged. Accordingly, Decker and Young Inc. $($Decker and Young$)$ was appointed as the new independent external auditor on $30$ November $2018,$ for the $31$ December $2018$ year$-$end audit. Decker and Young is a medium$-$sized auditing, tax and advisory firm. The previous auditors did make prior$-$year working papers available to Decker and Young and based thereon the new engagement partner is satisfied that reliance can be placed on all opening balances for the current financial year audit. Smart$-$Pack is currently experiencing cash flow difficulties and is operating at the limit of its overdraft facilities. Therefore, Alicia requested that the signed audited financial statements be available by $4$ February $2019,$ as Smart$-$Pack wants to apply for increased bank overdraft facilities from Invest Bank. Invest Bank requires audited financial statements that comply with International Financial Reporting Standards $($IFRSs$).$ The company$$s poor cash flow position is largely due to poor working capital management. The poor working capital management was first noticed in the South African operations but has been worsened by the increased production needs to service the new Lesotho and Botswana business lines. You are a first$-$year trainee accountant in the audit and assurance division of Decker and Young focusing on manufacturing enterprises. In addition to the above information, you have received the following: Documentation reference Description Memo A Notes from a meeting with the company buyer Memo B Planning notes on trade receivables and related items Workpaper C$01$ Sample of trade receivables selected for detailed testing MEMO A NOTES FROM A MEETING WITH THE COMPANY BUYER $1.$ Staffing The procurement department of Smart$-$Pack consists only of Xolani Gwebe, the company buyer, who has been with Smart$-$Pack since the inception of the company. Although he is extremely busy, he has on more than one occasion declined management$$s offer to appoint an ordering clerk to assist him in the procurement department. The raw materials warehouse manager, Julius Sibanda, has three warehouse assistants, who are collectively responsible for receiving raw materials from suppliers and selecting and issuing raw materials for the production process. After completion of the production process, the final products are stored in the finished goods warehouse, which is managed by Bob Martins and two warehouse assistants. $2.$ Ordering Xolani is responsible for placing orders with suppliers. He bases decisions on which items and quantities to procure on an Excel spreadsheet, on which he tracks his orders and the quantities previously ordered as well as details of supplier promotional sales and special offers. Xolani uses a procurement system to generate a pre$-$numbered order in duplicate. The original order is sent to the supplier via email and a copy is retained in a pending$-$order file. Prices on the orders can be updated and changed by Xolani as necessary, depending on the current prices negotiated with the suppliers. Smart$-$Pack does not maintain a perpetual inventory system. Monthly stock counts are conducted in the raw materials warehouse by Julius and in the finished goods warehouse by Bob. $3.$ Preferential procurement of inventory The following information regarding preferential procurement was obtained from discussions with Xolani: In view of the anticipated increase in sales from the Botswana and Lesotho business lines, Alicia signed a guaranteed supply contract with Paper & Plastics $($Pty$)$ Ltd $($P&P$)$ on $1$ January $2018.$ P&P is a South African company that supplies raw materials such as plastic, paper and wood to manu