AFR Manufacturing Company's senior management asked the internal

audit function to conduct an operational safety audit of the production

facility's metal drill press unit. More specifically, the internal audit

function was asked to determine how well the metal drill press

equipment and equipment operators comply with company safety

policies.

Five downtime injuries of drill press operators occurred in the last six

months. The total downtime for the five injuries was 37 hours.

Management estimated that the drill press downtime, and the resultant

decrease in overall productivity, reduced revenue by approximately

$265,000. In addition to the downtime injuries, two drill press operators

experienced detectible hearing loss during the six-month period.

The internal auditors learned that the company's safety policies include

the following:

Operators are required to wear safety glasses, ear plugs, and

protective gloves.

The drill presses are required to have a clear, plastic safety shield and

a protected channel to safely feed the metal through the press.

The drill is operated by a knee switch. The operator engages and

disengages the drill by shifting his or her right knee.

The internal auditors found the equipment to be in relatively poor

condition with little evidence of any regular maintenance. Drill bits were

not replaced as they became dull, and broken bits often were used

because new bits were not kept in supply. Two of the 10 drill press

machines were missing safety shields. Five of the 10 machine operators

were using the protective ear plugs at the time the auditors visited the

plant and six were wearing safety glasses. Four of the knee switches

were found to be sticking occasionally in both the off and on positions.

The auditors perceived a general sense of negligencenegligence by

production management, drill press equipment operators, and

maintenance employees.

A. Based on the scenario presented above:

1. Clearly state the internal audit engagement objective.

2. Prepare one or more well-written internal audit observations that

include: condition, criteria, consequence(s), and cause(s).

B. Refer to exhibit 12-4. At what level would you position the

observation(s) you prepared in A.2. above? Clearly explain your

rationale.

C. Draft a memo to senior management in which you describe a

consulting engagement that the internal audit function could

perform in response to the operational safety audit results.