An audit carried out between October and November 2014 revealed that FRIM's procurement management had complied with the price quotation and tender procedures. However, there were weaknesses in procurement through direct purchases and project implementation as follows:

i.Procurement of supplies/services namely supply of labour, security, supply and installation of telephone lines, and car rentals amounting to RM737,285 for the same type of items were split into smaller amounts to avoid the procedures on price quotation.

ii.FRIM made a direct purchase for supplies and/or services which exceeded the threshold. In 2014, there were four procurements amounting more than RM150,000 out of 2,314 procurements with a total amount of RM11.62 million processed without price quotations.

iii.A total of 39 local purchase orders amounted to RM885,788 were issued only after the supplies and/or services were received by FRIM.

iv.Equipment worth RM570,000 was not installed in the tower and the Gateway House as planned.Audit also found that the Gateway House valued at RM74,200 was idle, unmanaged, damaged and there were traces of intrusion and theft.

v.A solar dryer worth RM229,800 which was installed at the Postharvest Technology Centre, Maran, on 4 August 2014 has yet to be utilized due to the absence of clean water or Reverse 6 Osmosis water supply. The use of ground water was not suitable because it contained microbes which would affect the quality of samples and products to be produced.

vi.Research and herb processing equipment amounting to RM243,520 was yet to be used in the Postharvest Technology Centre, Maran.

All the audit findings were presented to the top management of FRIM. The Director is worried about the efficiency and effectiveness of procurement activities practiced by FRIM. The head of the procurement department is required to report on the audit findings and the strategies to overcome those problems in three weeks' time.

Describe three elements that need to be considered by the internal audit team in setting up an audit engagement