Assessment Task:

Case Study 1

Up and At them is a training organisation. It invoices customers when it provides training information and courses rather than collecting cash when the services are provided. The responsibility for revenue and receivables is separated between three clerks as follows:

- A clerk responsible for the sale of training information
- A clerk responsible for registration for training resources
- A clerk responsible for donations received from benefactors

The three clerks report to an office manager who reports to the managing director. The office manager prepares regular accounting information from the integrated accounting system.

When the mail arrives each morning the office manager opens and sorts the mail. Each clerk is given the receipts that relate to their responsibilities. They prepare a batch total and enter the details onto the computerised accounting system.

At 3 pm a deposit slip is printed from the integrated accounting system and one of the clerks takes all the receipts and the deposit list to the bank.

The office manager approves bad-debts write - offs.

The managing director considers all the employees to be trustworthy but a number of factors have caused her to want to conduct an internal audit:

- She had heard the internal controls are really important
- Sales have been low compared to previous periods
- She needs to employ a temporary staff member to fill in for one of the clerks while on maternity leave.

The managing director asks you to review the internal controls over sales and donations to provide suggestions for improvement.

Required:

a) Draw a simple organisation chart of the current staff and list their responsibilities '
b) List the weaknesses that are apparent in the current processes
c) Explain how processes can be changed so that controls provide reasonable assurance that cash receipts are accurately recorded.

Case Study 2

The internal auditor of Margaret River Wines is conducting a review of the sales department. He finds that over the last two years the number of sale administration staff in the Western Australia branch has been reduced by half.

It appears that the reduction from 8 clerks to 4 clerks is due to management targets of maintaining profit per employee. In the last management planning meeting it was felt that 4 clerks would be sufficient. The 4 clerks included 2 ex sales staff who wanted to change to an office job instead of continued travelling.

In reducing the staff numbers management considered it necessary to retain the experienced staff. Six months ago 2 of the experienced staff left for personal reasons and were replaced by junior clerks with no sales experience. Also the other remaining experienced clerk was promoted to supervise a sales region and was rarely in the administration office. The resulting vacancy has not been filled.

Required:

a) Discuss the attitudes of management in reducing staff numbers.
b) Identify the risks that the internal auditor needs to take into account in the internal audit of the Western Australia Sales function.

Case Study 3
A branch office of the Fermantle Insurance Company consists of a branch manager and 5 clerical assistants. the branch manager reports to a division manager. The branch manager reports to a division manager. The branch has its own bank account in which daily takings are deposited by the end of each day. The cash register rolls are reconciled to these cash deposits by the sales clerk.
Cheques are drawn from the bank account to pay branch supplies. The cheques must be signed by either the branch manager or the regional manager. Expenditure reports are completed by the branch manager who then sends them to the regional office.
Bank Statements are received by the branch manager who performs the bank reconciliation on a monthly basis.

Required:
a) What control weaknesses are apparent?
b) Describe any risk of error or fraud.
c) Suggest improvements that can be made.

Case Study 4:

Red Earth Enterprises Pty Ltd is a fast growing company. It was registered as a company with the Australian Securities and Investment Commission on 15 June 2014. Sales have been going through the roof and everybody has been frantically trying to fulfil orders and keep customers happy, however, there has been a growing disquiet with the CEO that corporate governance compliance issues have been overlooked, and that for all the high volume sales there may be some poor results being generated for the company in customer goodwill and with the regulatory bodies.

The CEO asked you (the Business Manager) to go and investigate the paperwork and interview the sales manager and accounts people to get all the facts.

On 1st August 2015 you begin your investigations, into the paperwork and conduct interviews with the key people. After a few days you are back at your desk with your notebook and go through the following points that you noted as you conducted the audit.
1. The 3 monthly BAS for June 2015 has not yet been completed and lodged.
2. The sales manager wants to get rid of the archived financial and employment records from 5 years ago. She says that they are taking up space that could be used to hold selling stock.
3. The sales manager had also discussed other revenue raising options like selling the list of the few thousand people that had entered the ‘Give-away' competition to a marketing company. She said it would be making money for nothing.
4. Before the sales person left he said that a customer had asked to see their records, but the sales person refused, saying that the customers' records were private and confidential and belonged to the company.
5. There was a payment of interest earned from deposit funds for $300, but it was not recorded in the 30th June 2015 accounts.
6. The warehouse manager kept a clean, well-organised office because as he says ‘I don't bother to keep the inventory records, otherwise the place would fill up. Anyway, they are not important once the stock take is done and entered in the system'.
7. The company has a common seal, but does not have the ABN (Australian Business Number) or the ACN (Australian Company Number) number on the imprint.
8. The accounts payable clerk approved a stationery order for $2,628, but on checking her financial delegations in that role, you noted that her limit was $1,000 per transaction with any single supplier.
9. The annual return from ASIC was still not completed, even though it was received on the anniversary of the company's registration (May 5th).
10. The accountant told you that the company had decided to change the registered office to the bookkeeper's office on the 15th June 2015, but when asked, the accountant said he was too busy to lodge any forms.
11. In searching through the files you note that for the past two months the number of report deadlines missed rose from 10% in May to 50% in June.
12. Mistakes in invoices requiring a credit/debit note adjustments had also increased from 1 % in May to 5.5% in June.

Required:

a) Prepare an internal audit report based on your findings including the following:

- Executive Summary
- Objective and Scope
- Specific findings and recommendations

b) Using this case study information and internal audit report, you need to develop a spreadsheet detailing:

- All identified issues and non-compliances
- Changes to be implemented to address the non-compliances
- Expected duration or time requirement to address identified areas.

* Required table/spreadsheet layout:

Attachment:- Case Study.rar