(b) On 1 April 2004 Volcan introduced a ‘reward scheme’ for its customers. The main elements of the reward
scheme include the awarding of a ‘store point’ to customers’ loyalty cards for every $1 spent, with extra points
being given for the purchase of each week’s special offers. Customers who hold a loyalty card can convert their
points into cash discounts against future purchases on the basis of $1 per 100 points. (6 marks)
Required:
For each of the above issues:
(i) comment on the matters that you should consider; and
(ii) state the audit evidence that you should expect to find,
in undertaking your review of the audit working papers and financial statements of Volcan for the year ended
31 March 2005.
NOTE: The mark allocation is shown against each of the three issues.
