Automobile Caribbean Co sells cars, car parts and petrol from 25 different locations in one country. Each branch has up to 20 staff working there, although most of the accounting systems are designed and implemented from the company's head office. All accounting systems, apart from petty cash, are computerised, with the internal audit department frequently advising and implementing controls within those systems.

Automobile Caribbean Co has an internal audit department of six staff, all of whom have been employed at Automobile Caribbean Co for a minimum of five years and some for as long as 15 years. In the past, the chief internal auditor appoints staff within the internal audit department, although the chief executive officer (CEO) is responsible for appointing the chief internal auditor.

The chief internal auditor reports directly to the finance director. The finance director also assists the chief internal auditor in deciding on the scope of work of the internal audit department.

You are an audit manager in the internal audit department of Automobile Caribbean Co. You are currently auditing the petty cash systems at the different branches. Your initial systems note on petty cash contain the following information:

1. The average petty cash balance at each branch is $5,000.

2. Average monthly expenditure is $1,538, with amounts ranging from $1 to $500.

3. Petty cash is kept in a lockable box on a bookcase in the account's office.

4. Vouchers for expenditure are signed by the person incurring that expenditure to confirm they have received re-imbursement from petty cash.

5. Vouchers are recorded in the petty cash book by the accounts clerk; each voucher records the date, reason for the expenditure, amount of expenditure and person incurring that expenditure.

6. Petty cash is counted every month by the accounts clerk, who is in charge of the cash. The petty cash balance is then reimbursed using the 'imprest' system and the journal entry produced to record expenditure in the general ledger.

7. The cheque to reimburse petty cash is signed by the accountant at the branch at the same time as the journal entry to the general ledger is reviewed.

Required:

(a)Explain three issues which limit the independence of the internal audit department in Automobile Caribbean Co

(b)Recommend a way of overcoming each issue.

(c)Explain the internal control weaknesses in the petty cash system at Automobile Caribbean Co for each weakness, recommend a control to overcome that weakness.