Read the Case Study below and answer ALL of the questions that follow.
TechSavvy (Pty) Ltd. is a prominent electronics retailer based in Johannesburg. The company specializes in selling a range of electronics, including smartphones, laptops, gaming consoles, and home appliances. With a robust online platform and several brick-and-mortar stores across South Africa, TechSavvy imports branded electronics from international manufacturers in Asia and Europe. Additionally, they have recently started offering exclusive tech gadgets from emerging South African tech startups, such as innovative solar-powered chargers and smart home devices.
Financial Information:
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During the financial year, TechSavvy (Pty) Ltd. reported purchases amounting to R70 million.
The year-end trade payables balance stood at R11 million, a 25% increase from the previous year.
A significant deal was entered into with a new local supplier, "Mzansi Innovations," for an exclusive range of eco- friendly smart home devices. This deal alone accounted for purchases of R7 million.
TechSavvy (Pty) Ltd. capitalized on early settlement discounts with several suppliers, especially those from Asia, and entered into a few extended payment agreements for high-value purchases, like premium gaming consoles and high- end laptops.
The company utilizes a state-of-the-art ERP system (Enterprise Resource Planning) for its accounting and inventory management.
Question 1 (15 Marks)
Based on the provided information, draft substantive audit procedures to address the key audit areas related to purchases of TechSavvy (Pty) Ltd. For each procedure you write down, indicate which assertion you are covering with that audit procedure. Substantive Audit Procedure - Purchases Assertion
You will receive 1 mark for each valid audit procedure addressing the purchases class of transactions. You will receive another mark for identifying the correct assertion covered by each audit procedure.