Reference no: EM133127838

UG055 Internal Audit and Financial Control - College of Banking and Financial Studies

Task 01- Engagement Audit Planning

CDE LLC is a manufacturer of almost one hundred different automotive components that are sold in both large and small quantities on a just-in-time (JIT) basis to the major vehicle assemblers. The Accounts Receivable Department at CDE LLC includes ten staff who process all receipt invoices and receive the payments from the customers. The internal audit team of the company is preparing the internal audit engagement plan to conduct an internal audit at Accounts Receivable department. The team of internal auditors have gathered following information regarding Accounting Receivable department of CDE LLC.

A. Business Objective - Sales orders are verified, validated, and approved.
Inherent risk Identified related to above business objective are as follows,
i. Incomplete and inaccurate customer orders. The impact of occurrence is Medium, and the likelihood of occurrence is High. Existing control - No controls is in place
ii. Sales to customers with poor credit The impact of occurrence is High, and the likelihood of occurrence is High. Existing control - No controls is in place
iii. Producing fictitious sales order by sales staff

The impact of occurrence is High, and the likelihood of occurrence is Low. Existing controls - Duties are segregated.
B. Business Objective - Sales Invoices are appropriate and authorized.
Inherent risk Identified related to above business objective are as follows,
i. Incomplete and inaccurate generation of sales invoices
The impact of occurrence is Medium, and the likelihood of occurrence is Medium.
Existing control - Invoices goes through the approval process
ii. Producing fictitious invoices that are not reviewed and approved by appropriate personnel.
The impact of occurrence is Low, and the likelihood of occurrence is Low.

Existing control - Duties are segregated and invoices goes through the approval process.
C. Business Objective - Timely collection of receipts and recording
Inherent risk Identified related to above business objective are as follows,
i. Without proper cutoff, an overstatement of accounts receivables and revenue. The impact of occurrence is Medium, and the likelihood of occurrence is Low. Existing control - The accounting entries and account receivable accounts goes through the monthly review by the head of account receivable department.
ii. Account receivable department employees steal collections.

The impact of occurrence is Low, and the likelihood of occurrence is Medium. Existing control - Duties are segregated.

Assume you are part of the internal audit team at CDE LLC.

A. prepare the Risk and Control Matrix and Risk Heat Map and advise the internal audit team the risks that the internal auditors should prioritized during the audit at accounts receivable department at CDE.

B. Discuss the actions performed by your team to gather information related to accounts receivable department (such as business objectives, inherent risk and controls in place) and the areas to be consider while allocating resources to the engagement.

Task 02 - Fraud
ABC Bank, one of the leading bank in Sultanate of Oman with more than 100 branches across the country. Branch X of ABC Bank is situated in a prominent area and have a larger customer base exceeding a monthly transactions more than 1 million Omani Rials.

Branch Structure
The branch X is headed by one of the Senior Manager of ABC Bank, Mr. Mohammed and around 25 employees including six supervisory level officers are working under him.

Given below is the branch's hierarchical structure

On 12.10. 2021 the branch's customer service department received a complaint from one of its loyal customer Mr. Ahmed regarding a suspicious transaction on his current account statement.

The issue

Attached is the copy of his complaint.

After receipt of the aforesaid complaint, branch manager immediately checked the relevant record and found that instant cheque debited to the account is with the forged signatory and does not match with the client's signature held on records.

Branch Manager immediately reported the matter to its Head office for necessary action and guidance. Head Office immediately swung into action and marked the said fraud to its internal audit department for a thorough investigation and to report within a week period.

During the audit the internal auditor found out that the cheque with the forged signatory was submitted as a non-crossed cash cheque and has been paid over the counter by one of the new banking assistants. The banking assistant has failed to scrutinize the detail of withdrawer at the backside of the cheque leaf. Further the officer in charge for the counter staff had gone for lunch during the time of withdrawal and the authorization password of the officer has been used by another banking assistant to approve the payment. The daily audit on the transaction vouchers is done by the assistant branch manager on the previous day morning. When the internal auditor question about how he had not noticed the discrepancy the answer received from the assistant branch manager was shocking. The assistant branch manager informed that he will only scrutinize the payment and deposit slips with the transaction report during the daily audit.

Requirement
Assume you are the internal auditor appointed to investigate this issue; you are required to prepare a report to head of Internal Audit of ABC bank

Task 03
The lecturer will conduct a presentation of the report. Learners are required to prepare a power point presentation consisting of 8-10 slides and submit it on MS Teams before presentation. Each student must present for minimum of 3 minutes to maximum 5 minutes.

Attachment:- Internal Audit and Financial Control.rar