Practice Firm Internal Controls Fnsacc 516 Task2 Student 191129 PDF

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Summary

individual tax preparation assessments and answers for the 2020/2021 year...

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STUDENT

RMIT Classification: Trusted

STUDENT - PRODUCT ASSESSMENT TASK Task Number

2 of 2

Task Name

National unit/s code

FNSACC516

National unit/s title

National qualification code RMIT Program code

FNS50217 C5390

National qualification title RMIT Course code

Practice Firm Internal Controls Implement and Maintain Internal Control Procedures Diploma of Accounting ACCT5429C

Section A - Assessment Information Duration and/or due date:

Assessment due as per Canvas syllabus

Task Instructions Summary and Purpose of Assessment This is assessment task two (2) of two (2) that you are required to complete for this course. You must satisfactorily complete both assessments to be deemed competent for this course. The purpose of this assessment is to have students participate in a range of tasks that are typical of an internal auditor. As part of this, students will review a range of internal operations and provide recommendations to ensure organisational compliance with corporate governance principles, ethical requirements and related legislation. Assessment Instructions What There are three parts to this internal audit assignment based on SBG Travel: •

Part A – Individual Report

You are required to create two (2) reports based on the audit findings for SBG Travel in different areas of internal control. •

Part B – Group Work

You will work in small groups of 2 – 4 to develop implementation schedules for 2 areas of internal control for SBG Travel. •

Part C – Scenario

You will be required to assess the progress of an area of internal control following the implementation and evaluate and report on progress. Further instructions for Parts A, B and C are provided below.

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FINAL APPROVED – STUDENT PRODUCT ASSESSMENT TASK TEMPLATE – June 2019_Version 2.0

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STUDENT

RMIT Classification: Trusted

SBG Travel As a new employee of SBG Travel, it has been decided to assign you to the newly created Internal Audit Department to give you experience in better understanding the processes and controls within the Company. This is a job rotation which will be managed by the Internal Audit Manager. Over the next few years, the SBG Travel Board of Directors wish to develop the company into an industry leader. The operating activities, sales and finance functions are being continuously reviewed, like all efficient businesses. This is particularly required in an increasingly competitive industry, affected by technology. The internal audit function has been operating for a short time and the results of its audit have been positive and well received.

Part A – Individual Reports The Internal Audit manager of SBG Travel wants you to provide feedback on a range of issues that have been identified in the review of key business processes. You have been asked to report on specific issues in each areas of the organisation in line with the findings below. Your Internal Audit Manager has requested that you produce two (2) separate Audit Review reports as follows: 1. 2.

Report for PURCHASING FUNCTION AUDIT Report for PAYROLL FUNCTION AUDIT, CASH AUDIT and IT AUDIT

When documenting your reports, your manager wants you to use the Internal Controls format (Appendix A) to detail and document the required modifications to procedures to facilitate compliance with internal control procedures. This is a standardised format to promote consistency of implementation. Each of your reports must be distributed to your manager (assessor) by the end of Week 10. Submit both reports in CANVAS so that your manager can review and provide feedback. Ensure you review your work and check for errors beforehand. Audit Issues that have been identified: 1.

PURCHASING FUNCTION AUDIT

The purchasing department of SBG Travel consists of the following: • • • •

A Purchasing manager reporting to the Managing Director A Purchasing officer reporting to the Purchasing manager An administrative support supervisor, who reports to the purchasing officer Two administrative support officers, reporting to the administrative support supervisor

Following the operational audit of the central Purchasing function, 800 purchase orders were reviewed and the following weaknesses were found: •

51 orders were not signed by a purchasing officer

• •

15 were not authorised by the correct purchasing officer for that product 12 purchases of goods or services were made with verbal requests from branch travel agent manager

•

and purchase orders were not raised for them 35 orders have been outstanding for more than 3 months.

• •

8 additional orders have been raised duplicating orders for good included in those orders outstanding for more than three months 5 orders were for goods for the personal use of staff but consequently and correctly charged to them

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STUDENT

•

RMIT Classification: Trusted

2 order sets were missing.

In addition to the above, the organisation structure of the Purchasing function was reviewed and found to be ineffective in being able to comply with the basic tenets of internal control. Tasks required: a. b.

Describe the procedure used in the operational audit that may have discovered each of the above errors of procedure or control. In report, you need to include details of the following: I.

The identification of the error(s) found

II.

An analysis outlining the possible consequences of the error from both a corporate governance and ethical requirements perspective Review the financial delegations and accountabilities of the current Purchasing Organisation and document the risks found. Develop and document modifications to guidelines/procedures for staff to facilitate organisational compliance with internal control procedures and corporate governance principles. Document a modified Purchasing Organisation Chart with any additional details and duties that maybe needed, including correct financial delegations and accountabilities to ensure consistency and compliance with the internal control procedures, corporate governance and ethical requirements, appropriate financial legislation and industry-standard practices.

III. IV. V.

2.

PAYROLL FUNCTION AUDIT The SBG Travel payroll function uses MYOB and has the following characteristics: •

Managing Director authorises new and changed individual employment offers.

•

HR Advisor updates the Employee Masterfile for new employees, terminations and changes to pay rate and banking details. Paperwork supporting the changes is filed in the personnel files, with a copy provided to payroll. Payroll clerk enters: ✓ timesheet and leave forms ✓ Calculates termination pay ✓ Runs the payroll ✓ Prepares a package for the Chief Accountant containing: Payroll report Audit report of changes to the Employee Masterfile and supporting paperwork provided by HR ✓ Copies of all leave forms and termination calculations ✓ A report comparing the variance between last fortnight’s payroll and this fortnight’s payroll • Chief Accountant: ✓ checks and approves the payroll package ✓ creates the EFT payment upload ✓ presents the payment upload to the Managing Director for approval

•

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Tasks required: a. b.

3.

Document the potential weaknesses in these internal controls over payroll accuracy and prevention of fraud in line with current financial legislation. Make a recommendation that will prevent or detect future instances of the error. In developing the enhanced internal control procedures ensure that they apply to Corporate Governance requirements for the business’s internal operations (in this case the payroll system). Use information from your handout to seek and clarify information from at least two (2) other appropriate authoritative sources (e.g. ATO) to inform the recommendations. All sources used, the reason why they were contacted for clarification purposes and the actual information sourced must be supplied as an appendix to this assessment.

CASH AUDIT SBG Travel electronically invoices all customers rather than collecting cash when services are provided. Julie Law, who is an accountant, opens all the inward mail on a daily basis. She does this in order to respond quickly to customers’ needs and any other queries or problems they may have. When she opens the mail, all correspondence is handed over to the Office Manager but all cash remittances are listed by her immediately. She deposits all cash listed promptly. Then she uses the listing to prepare the cash receipts journal (in MYOB) and to update the Accounts Receivable. Julie Law’s duties also include approving credit, authorising any allowances and writing off bad debt. The Accounting Manager is very happy with her work. Following a recent audit it was discovered that Julie Law has committed major theft of the company’s cash collections. She did not record some sales, and authorised fictitious credits to customers

Tasks required: a. b.

Identify the key Internal Control weaknesses in the Cash system of the business. Develop and document modifications to guidelines/procedures for staff to facilitate organisational compliance with internal control procedures. Note all sources of information accessed and used.

4. IT AUDIT The SBG Travel Internal Audit Department have reviewed the IT function to assist in establishing new efficiencies. After an extensive review of the IT management procedures, the auditor discovers the following: When reviewing the company’s IT organisation for financial delegation and accountabilities, the Audit Department listed the following duties: Systems Analysts: • Supervise programming staff. • Design client applications or select third party software. • Check operation of applications while running. • Determine any necessary maintenance or efficiency adjustments and corrections to program applications and make such program changes as necessary. • Train Computer Operators in program applications they have designed. • Prepare User Operations Manual for applications they have designed. [ Practice Firms Internal Control ] [ 2 of 2 ] Student product assessment task © Content is subject to copyright, RMIT University

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STUDENT

Programmers: • • • •

RMIT Classification: Trusted

Code program applications to specifications designed by system analysts. Assist System Analysts in documenting application procedures. Prepare test data for testing program. Operate computer when testing programs or when computer operators are absent due to illness or annual leave or during end of month second shifts.

Librarian: Ensure computer operating system is maintained to latest version from software supplier. Maintain register of all client application programs. Maintain register of all utility programs. Secure all programs not in use in a cupboard in the computer room. Create backup copies of all data and programs once a month and store in the "Library" cupboard in the computer room.

• • • • •

Other IT General security procedures were also noted as follows: i. Each member of the staff signed a daily log book when they arrived and left for the day. Many staff members signed for both arrival and departure on arrival or during the day when their workload allowed them. ii. Visitors were issued with a visitor's badge at the entrance to the IT area and allowed them to then enter to see the relevant member of staff. iii. Security doors to the IT department and the computer room were usually left open. iv. Fire alarms were functioning but fire extinguishers were not carrying valid test tags. v. The company had regular tours of their computer room by schools in the vicinity. vi.

The computer hardware supplier had recently moved their head office operations to another state. Their new head office had the only other mainframe computer of their brand that was large enough to be used as an emergency backup.

Tasks required:

a) Review the current roles of the IT organisational staff and identify any conflicting roles and responsibilities, explain why these are internal control weaknesses and recommend who should do these roles and why.

b) For each of the IT General Security issues, review and develop procedures to identify the internal control issues, the risks to the business and develop appropriate modifications to ensure organisational compliance that will prevent or detect future instances of the error.

Part B: Group Work Note: To complete this part, the assessor will organise you to break off into small groups of 2-3 to develop implementation schedules for 2 areas of internal control for SBG Travel. Task Required: 1.

2.

3.

During Week 11, the manager (assessor) wants to meet with the students, the Operational Purchasing Manager and Accounting Manager (key audit stakeholders). Schedule and attend the meeting. To ensure agreed timeframes are met, at the start of the meeting, distribute their report containing recommendations to both parties. Discuss and review the key internal control weaknesses and then recommend effective operating procedures they are putting forward to be implemented to ensure organisational compliance. Summarise the key outcomes from the meeting including questions asked. From the discussion, students will need to agree upon and document appropriate timetables to implement

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4.

RMIT Classification: Trusted

their recommendations for two (2) of the areas they reported on (in Part A). Both timetables should run for up to 6 months (maximum) and outline the key methods, work practices and routines to be used. Submit both timetables with comments into Canvas for final review with the Internal Audit Manager.

Part C: Scenario It is now 6 months after you met with the operational Purchasing Manager to discuss the report of the findings of the internal control weaknesses and the recommendations that were advised to him to implement. Following the meeting, it was agreed that he would implement all the recommendations as per the timetables that you have provided. The Audit team have now completed a follow-up Audit on Purchasing and have given a summary of the key Internal Control performance indicators and the number of process reporting errors found for each: Purchasing Internal Control Performance Indicators Audit Results: Internal Control Objective 1. Completeness

Number of errors 5

Population Sampled 800

Summary Of Error No evidence of the Purchase Order being cancelled Purchase Order did not match to purchase requisition on quantity and price Supplier details do not match to the master supplier list Purchase requisition were not approved by department head

2.

Accuracy

2

800

3.

Validity

1

800

4.

Accountability

10

800

Tasks required: You have been asked to: 1. 2.

3.

4.

Review the Performance Indicators to report on their compliance with the Corporate Governance/Internal Control procedures they recommended 6 months ago. Identify and evaluate the variations following the adoption and implementation of the Corporate Governance Requirements/Internal Control procedure recommendations made 6 months ago. As part of the evaluation, determine the causes of the variations detailed, specifying whether it relates to specific organisational structural issues, record-keeping practices etc. Comment and write a report on any changes to and/or resulting compliance with financial legislation (where applicable) stating how the new operating procedures comply with corporate governance requirements, organisational policy, and financial delegations and accountabilities (refer to the handout for guidance). Explain how this should be maintained moving forward to ensure ongoing consistency and compliance. Students are to document their evaluation findings and submit it to the Audit Manager via Canvas at the end of week 12.

Where You will be provided some class time to work on this assessment, however, it is expected that the majority of this assessment will be completed outside of class.

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STUDENT

RMIT Classification: Trusted

How You will be assessed against the criteria listed in the marking guide in Section B of this task. To achieve a satisfactory result, you will need to address all criteria satisfactorily. Conditions for assessment

•

This is an individual assessment. You must not copy the work of others. You must submit their own work written in their own words. You must submit all parts of the assessments by the due date outlined above

•

You will be assessed as satisfactory or not satisfactory based on the marking guide outlined in Section B

•

Please make arrangements with your assessor at least one week prior to the assessment due date if you feel you require special allowance or allowable adjustment to this task.

•

For the other circumstances and types of assessments students need to apply for Special Consideration. More information is available on https://www.rmit.edu.au/students/student-essentials/assessment-andexams/assessment/special-consideration webpage.

•

Please ensure your full and correct name is written on the student version of this assessment task (do not use nicknames or abbreviations). You can appeal the assessment decision according to the RMIT Assessment Processes

•

•

Instructions on submitting your project/portfolio/report You are required to submit all parts of the assessments via Canvas by the given due date outlined above. Equipment/resources students must supply: • •

Computer/Laptop with WiFi access Business software (Word &Excel) available free to students from the RMIT Website

Equipment/resources to be provided by RMIT or the workplace: • •