subject: ADVANCED ADUIT AND ASSURANCE Case Study PakWheels.com sells motor vehicles and spare…
subject: ADVANCED ADUIT AND ASSURANCE
PakWheels.com sells motor vehicles and spare parts. It also
provides servicing and repairs for vehicles. They have recently
expanded from operating on four sites to eight sites. Each site has
a showroom for new and used automobiles, spare parts store and a
Many of the second-hand vehicles sold by PAKWHEELS.COM are
vehicles that have been traded in by customers in part-exchange for
a new or newer vehicle. Many used cars are sold for cash.
New cars are imported from a single manufacturer and are
delivered on consignment. PAKWHEELS.COM pays the agreed purchase
price plus 3% interest 3 months after delivery. PAKWHEELS.COM has a
legal right to return unsold cars to the manufacturer, but in
practice never does so.
New cars are sold with a 2 years warranty from the manufacturer
and used cars are sold by PAKWHEELS.COM with a 1 year guarantee.
All repairs under warranty or guarantee are carried out by
PAKWHEELS.COM in its service workshops.
Each site carries a large amount of spare parts in its parts
workshops. These operate under the brand name ‘Power parts’ and
many parts are actually labelled with the Power parts brand name. A
perpetual inventory system is used and storekeepers continually
check inventories of parts.
The car service workshops try to complete all jobs on the same
day that they are started, and are successful in about 80% of
cases. Jobs are usually invoiced immediately after completion, and
are usually paid for by customers when they come to collect their
The senior sales representative at each site is able to use a
new car, selected from each consignment delivered from the
manufacturer. These cars are used for business purposes and as
demonstration models. They are eventually sold second-hand as
PAKWHEELS.COM purchased the Power parts brand name for its parts
stores. Senior management believe that the cost of the brand name
should not be amortised because they consider that the asset has an
indefinite useful life. PAKWHEELS.COM has recently established an
internal audit section, although this has not yet done much
By taking into account the information shared in the case, you
are required to identify and explain the audit risks that will have
to be considered and dealt with when planning the final audit of
PakWheels.com for the financial year just ending.