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Auditing and assurance revision question #2345

Kim Tutu Enterprises produces laptops which it sells in Ndola, Lusaka and Mpika. The laptops have sold well for many years, at relatively high prices, due to low competition. No
credit sales are allowed. The company operates a divisionalised structure. All receipts are deposited in a collection account controlled by Head Office. Operational costs are paid out of
the current accounts operated by each division. A weekly report is sent by each division to Head Office every Monday morning. The company operates an imprest system for its petty cash at head office and at each of the divisions. The float for each division and head office is K40 000 and K76 000 respectively.
The combined cash balances at the year-end are usually material. The Cashiers and their Supervisors carry out cash counts at the year-end.
Kim Tutu Enterprises’ policy is to deposit all the cash receipts for a particular day on the following day. The head office Chief Accountant ensures that all Divisional Accountants observe this without fail. Any lapses attract serious disciplinary action, which can even result in summary dismissal.
Bank reconciliations are prepared on a monthly basis, and any misposts or unidentified credits or debits are immediately followed up by the head office Chief Accountant. In August, when the Cashier was forced to go on leave, the head office Chief Accountant discovered that 2% of the deposits for the month for Mpika Division were missing. Investigations revealed that the Cashier was engaged in teeming and lading fraud. The
cashier was dismissed and the money recovered from his leave pay. The Cashier had not been on leave for six years.
Kim Tutu Enterprises is audited by Hakesu & Co.
Required:
(a) Explain the quality of the different sources of audit evidence.
(b) Explain three (3) financial statement assertions in the audit of cash and bank balances.
(c) Describe five (5) substantive procedures for the cash balance in the financial statements of Kim Tutu Enterprises.
(d) Describe seven (7) substantive procedures for the bank balance in the financial statements of Kim Tutu Enterprises.

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