GOVERNANCE

TENDER Fiji, an NGO is 90% funded by the Government of Fiji. Last year, the organization received $7,000,000 government grant. However, recently, it appeared in the newspapers that the organization did not provide accountability for approximately $4,000,000 of government grant that was given to it last year.

Furthermore, the Government has also held approximately $8,000,000 of the grant money for this year and it will be only released to TENDER Fiji, once they have submitted an audited financial report for last year and provide accountability for the $4,000,000 of the grant money. Hunter Accountants, a public accounting firm has accepted to do the audit and at present are in the evidence-gathering phase. The organization has a competent internal auditor who reports to the Audit Committee. The Audit Committee reports to the organization's Chief Executive Officer (CEO).

The audit committee of the organization is made up of a CEO from a finance company, two accounting lecturers from a university and a sales executive of a local airline company. The audit committee members are independent of the management of the organization. The audit committee meets four times every year. Each time they meet, the discussion is based on the meeting's agenda. The meeting is normally for five hours. After the meeting, the Chair of the audit committee sends the minutes of its meetings to the organization's CEO. The CEO immediately acts on the recommendation of the audit committee.

Required:

1.Critically discuss the effectiveness of TENDER Fiji's control environment.

2.How much reliance will be placed by the external auditor on the work of the audit committee and the internal auditor of TENDER Fiji in order to gather evidence? Discuss.