I would like assistance with assignment 3 and 4 on the attached document I have been struggling with the subject and its my last

AUI4863/102/0/2016 Tutorial letter 102/0/2016 ADVANCED INTERNAL AUDIT APPLICATIONS AUI4863 Year course Department of Auditing IMPORTANT INFORMATION: Please activate your myUnisa and myLife email address and ensure you have regular access to the myUnisa module site for AUI4863-2016 since this is an online module. Open Rubric CONTENTS Page 1 INTRODUCTION .......................................................................................................................... 3 1.1 To get started on myUnisa ......................................................................................................... 3 1.2 How to study this module online ................................................................................................. 4 2 PURPOSE OF THE MODULE ..................................................................................................... 4 3 LECTURER(S) AND CONTACT DETAILS .................................................................................. 4 3.1 Lecturer information ................................................................................................................... 4 3.2 Department ................................................................................................................................ 4 3.3 College ........................................................................................ 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Bookmark not defined. 4 MODULE-RELATED RESOURCES ............................................................................................ 7 4.1 Prescribed books ....................................................................................................................... 7 4.2 Recommended books ................................................................................................................ 8 4.3 Electronic reserves (e-reserves) ................................................................................................. 8 5 STUDENT SUPPORT SERVICES FOR THE MODULE ............................................................... 8 6 MODULE SPECIFIC STUDY PLAN ............................................................................................. 9 7 PRACTICAL WORK AND WORK-INTEGRATED LEARNING .................................................... 9 8 ASSESSMENT............................................................................................................................. 9 8.1 Assessment plan ........................................................................................................................ 9 8.2 Assignments and assessment methodology applicable only to AUI4863 .................................. 11 8.3 Due dates and unique assignment numbers............................................................................. 11 8.4 Submission of assignments ...................................................................................................... 12 8.5 Assignments............................................................................................................................. 12 8.5.1 Compulsory assignment 01 ........................................................................................................ 12 8.5.2 Compulsory assignment 02 ........................................................................................................ 21 8.5.3 Assignment 03............................................................................................................................ 29 8.5.4 Assignment 04............................................................................................................................ 29 9 OTHER ASSESSMENT METHODS........................................................................................... 40 10 EXAMINATION .......................................................................................................................... 40 11 FREQUENTLY ASKED QUESTIONS ........................................................................................ 41 12 SOURCES CONSULTED .......................................................................................................... 41 13 CONCLUSION ........................................................................................................................... 41 14 ADDENDUM .............................................................................................................................. 41 2 AUI4863/102 1 INTRODUCTION Dear Student It gives us great pleasure to welcome you as an AUI4863 student in the Department of Auditing. We, as lecturers, are at your disposal and will gladly assist you in your studies. Be assured of our willingness to support you with advice during your study programme. Students must be registered for a myLife email address and must be able to access myUnisa to be able to access their study material, submit assignments, gain access to the library functions and various learning resources, download study material, \"chat\" to their lecturers and fellow students about their studies and the challenges they encounter, view podcasts and participate in online discussion forums. A number of tutorial letters will be made available on the internet (myUnisa) during the year. A tutorial letter is one way of communicating with you about teaching, learning and assessment. Please read this tutorial letter (Tutorial Letter 101) as it gives you an overview of important information with regard to studying within our college. Right from the start we would like to point out that you must read all the tutorial letters you receive during the year immediately and carefully, as they always contain important and, sometimes, urgent information. This tutorial letter contains important information that will assist you in your studies. Please read it carefully and keep it at hand when working through the study material, preparing the assignments, preparing for the examination and addressing questions to your lecturers. We trust that you will benefit from everything that this module has to offer. We hope that you will have a very enjoyable and successful year of study. 1.1 To get started on myUnisa For this module you will not receive printed tutorial letters. All study material for this module will also be available on myUnisa where you will be able to download and print all or parts of the study material. You must be registered on myUnisa to be able to access study material, submit your assignments, gain access to the library functions and various learning resources, to \"chat\" to your lecturer or teaching assistant and fellow students about your studies and the challenges that you might encounter, and to participate in online discussion forums, blogs or self-assessments. Importantly, myUnisa contains the Learning Units tool from which you will only be able to access the study material for this module if you have registered and have access to myUnisa. In addition to registering on myUnisa, it is crucial that you activate your myLife email address, as all your official correspondence regarding this module will be sent to your myLife address and not your private email address. Please consult with the my Studies @ Unisa publication for more information on the activation of your myLife email address as well as obtaining access to the myUnisa module site. Go to the website https://my.unisa.ac.za and login with your student number and password. Then you will see AUI4863-2016-Y1 in the row of modules in the orange blocks across the 3 top of the webpage. Remember to also check in the -more- tab if you cannot find it in the orange blocks. Click on the module you want to open. 1.2 How to study this module online This module is taught online this means that it is a different experience from some of your other modules at Unisa. 2 An online module means that all your study material and learning activities are online, on myUnisa. You will benefit from utilising the online platform and to participate in the discussion forums and view Podcasts. Attempt to submit all of your assignments online. If you submit your assignments online, make sure that you submit them on myUnisa in the required format (PDF). (Remember submitting your assignments online is faster and safer than by post.) Online tuition further implies that most of the communication between yourself and the university also happens online by email, in the Discussion Forums and through the Questions and Answers tool. Since study time is limited, communicating with you online is considered the most effective way. Remember as a prospective internal auditor you must be computer literate the day that you report for work. Use this module to nurture your computer skills. PURPOSE OF THE MODULE The purpose of this module is stated in the \"Introduction to the module\" under Learning units (Part A). 3 LECTURER(S) AND CONTACT DETAILS 3.1 Lecturer information Your lecturer and course coordinator for this module are: Lecturer Ms I Morgan E-mail: morgai@unisa.ac.za; Course coordinator Mrs BM van Wyk E-mail: vwykbm@unisa.ac.za; PLEASE NOTE: Personal appointments should be arranged beforehand. Always have your student number and module code ready when you contact the university!!! 4 AUI4863/102 3.2 Department Department of Auditing: If you wish to write to us, letters should be addressed to: The module leader: AUI4863 Department of Auditing PO Box 392 Unisa 0003 Secretary: Tel: +2712 429 4707 Departmental web page: http://www.unisa.ac.za/Default.asp?Cmd=ViewContent&ContentID=194 3.3 College College related undergraduate enquiries should be directed to: +2712 429 2233/2982 or Casenquiries-postgraduate@unisa.ac.za 3.4 University If you need to contact Unisa about matters not related to the content of this module, please consult the brochure my Studies @ Unisa, which you should have received with your study material. In this document you will find the contact details of various administrative departments. If you did not receive this document and have access to the internet, you can find it on myUnisa under the 'Resources' option. Remember to always have your student number ready when making an enquiry. Please ensure that you contact the correct section or department for each enquiry as this will result in a speedy resolution of the enquiry. The contact details are: E-mail addresses: info@unisa.ac.za for general enquiries study-info@unisa.ac.za for application and registration-related enquiries (prospective and registered students) international@unisa.ac.za for international students (registration-related enquiries) assign@unisa.ac.za for assignment enquiries exams@unisa.ac.za for examination enquiries despatch@unisa.ac.za for study material enquiries finan@unisa.ac.za for student account enquiries gaudeamus@unisa.ac.za for graduation enquiries myUnisaHelp@unisa.ac.za for assistance with myUnisa myLifeHelp@unisa.ac.za for assistance with myLife email accounts 5 aegrotats@unisa.ac.za for aegrotat exams remark@unisa.ac.za for remarking of papers recheck@unisa.ac.za for rechecking of papers condiscipuli@unisa.ac.za for fellow student names counselling@unisa.ac.za for student counselling and career development vospresc@unisa.ac.za for enquiries about prescribed books Library The my Studies @ Unisa booklet, which is part of your registration package, lists all the services offered by the Unisa library. General library catalogue enquiries Library web co-coordinator Inter-library loans enquiries Enquiries about subject databases Library information desk Enquiries about training presented by the library Send a question to the library staff bib-oasis@unisa.ac.za bib-web@unisa.ac.za libr-ill@unisa.ac.za bib-dbase@unisa.ac.za bib-help@unisa.ac.za bib-oplei@unisa.ac.za bibrefq@unisa.ac.za SMS numbers: Send an SMS to 32695 for more information on how to contact Unisa via SMS (only for students within the borders of South Africa). Students will receive an auto-response SMS with the various SMS options. Standard SMS rates apply. Students can also SMS enquiries directly to: 43578 for applications and registrations* 43584 for assignments* 43584 for examinations* 43579 for study material* 31954 for student accounts* 43582 for myUnisa and myLife* * The SMS number is only for students residing in South Africa. International students are urged to make use of the e-mail address info@unisa.ac.za. Fax number: ax enquiries to +2712 429 415 Online address Unisa website 6 http://my.unisa.ac.za http://www.unisa.ac.za AUI4863/102 Other means of contacting the University are: Physical address University of South Africa Preller Street Muckleneuk Pretoria City of Tshwane Postal address University of South Africa PO Box 392 Unisa 0003 NB: Lecturers cannot assist you with registration, payments, module codes, examinations, etc. These are administrative issues which should be discussed with the relevant sections. 4 MODULE-RELATED RESOURCES For library service request procedures, please consult the my Studies @ Unisa brochure. 4.1 Prescribed books In Internal Auditing, new editions of textbooks are published frequently. If necessary, you will be informed accordingly. Please ensure that you always have the latest edition available. The prescribed book for this module will be announced on myUnisa. Please consult the list of official booksellers and their addresses listed in the My studies @ Unisa brochure. Prescribed books are available at the university's official booksellers. If you have any difficulties in obtaining books from these bookshops, please contact the Prescribed Book Section as soon as possible at telephone number +27 12 429 4152 or e-mail address vospresc@unisa.ac.za. Information on the use and the sources of information available in the Unisa Library are detailed in the My studies @ Unisa brochure. The International Professional Practice Framework (IPPF) consists of the following components: - Code of Ethics - Definition of internal auditing - Internal auditing Standards (Attribute Standards and Performance Standards) - Guidance in the form of Practice Advisories, and other guidance endorsed by the Institute of Internal Auditors 7 You may either purchase the book mentioned above, obtain the student copy of the IPPF, or you can view the information directly on the Institute's web page at the following address: http://www.theiia.org Select the \"guidance\" option at the top of the page, and view the information contained in the \"Professional Practice Framework\" option that is on the left of the \"guidance\" page. However, in order to gain access to the Practice Advisories you have to be a member of The Institute of Internal Auditors. To obtain the book or a copy of the \"New Guidance for the Professional Practice Framework\" you can contact The Institute of Internal Auditors SA. Their contact details are as follows: Address: Tel: Fax: E-mail: IIA SA PO Box 2290 Bedfordview 2010 011 450 1040 011 450 1070 customerservices@iiasa.org.za The Gleim or Vallabhaneni textbooks are also available from the above-mentioned supplier. In addition, the prescribed textbooks are also available at the official booksellers. We want to emphasise that a study of the textbooks is essential. Students who plan to write the CIA examinations after completing this module can consider buying the entire set of four volumes of the CIA Exam Review textbooks. It is, however, important that only the latest versions be purchased. 4.2 Recommended books It is important to note that as a student it is your responsibility to enrich your studies by reading as extensively as possible and to use other sources to supplement the prescribed textbooks. Periodical articles can also be used as sources of information when answering your assignment and examination questions. Please remember to always acknowledge your information sources. 4.3 Electronic reserves (e-reserves) There are no electronic reserves prescribed for this module. 5 STUDENT SUPPORT SERVICES FOR THE MODULE For student support services you are referred to the my Studies @ Unisa brochure. Please also visit myUnisa for announcements and additional information resources. Unisa library Unisa library login You will be required to provide your login details, i.e. your student number and your myUnisa password, in order to access the library's online resources and services. 8 AUI4863/102 This will enable you to: view or print your electronic course material request library material view and renew your library material use the library's e-resources Requesting library books Students are expected to purchase their own copies of the prescribed books listed in Tutorial Letter 101. A limited number of copies are housed in the Unisa Libraries, subject to each branch library's lending regulations. Problems experienced in obtaining copies from booksellers should be directed to the Prescribed Book Section at e-mail vospresc@unisa.ac.za or telephone +2712 429 4152. Electronic requests The preferred way of requesting recommended or additional books is online via the library's catalogue. Go to http://oasis.unisa.ac.za, or via myUnisa, go to http://my.unisa.ac.za > Login > Library > Library catalogue, or for mobile access, go to http://oasis.unisa.ac.za/airpac (AirPAC). Telephonic book requests This can be done on +2712 429 3133. Please supply the reservation order number (RON). 6 MODULE SPECIFIC STUDY PLAN Please refer to Learning Unit: Part A - General orientation. In the syllabus section (1.3) you will be introduced to the topics that will be covered in this module. Please also make use of the Schedule link that is available on the left hand side menu of myUnisa. The Schedule link may be used as guidance to plan your studies and spread the workload evenly throughout the year. Also use the my Studies @ Unisa brochure for general time management and planning. 7 PRACTICAL WORK AND WORK-INTEGRATED LEARNING There is no practical work for this module. 8 ASSESSMENT 8.1 Assessment plan Assignments and learning The study material (including the prescribed textbooks) forms an integral part of your learning. Assignments assess your progress and your learning and must be submitted before the due dates. 9 Compulsory assignments The submission of the compulsory assignment 01 and 02 will prove that you are an active student and will therefore earn you admission to the examination. Admission to the examination will be obtained by submitting the compulsory assignments. You will undoubtedly realise the importance of commencing your study programme in good time so that you can obtain admission to the examination and earn a good year-mark. General remarks (a) All the Assignments are included in this tutorial letter and are also available on myUnisa. (b) The compulsory assignments (number 01 and 02), must be submitted on or before the due date to obtain admission to the examination. Make sure that it is marked as "01 or 02". (c) It is in your own interest to retain a copy of proof that the compulsory assignments were submitted so that you can produce this in the event that there should afterwards be any dispute concerning whether or not the assignment was received. (d) A year-mark of 20% will contribute to your final mark. This year-mark will be calculated as an average of the marks obtained for Assignments 01, 02, 03 and 04 (if you obtain at least 40% in the examination). You ALSO need a sub-minimum of 40% for your year-mark to be admitted to the examination. The final mark is calculated as follows: 5% x mark obtained for compulsory Assignment 01, plus 5% x mark obtained for compulsory Assignment 02, plus 5% x mark obtained for Assignment 03, plus 5% x mark obtained for Assignment 04 80% x mark obtained in the examination (sub-minimum of 40%) The sub-minimum of 40% relates to both the year-mark and the examination. It implies that if you obtain a year-mark of less than 40%, you will not be admitted to the examination and if you don't obtain at least 40% in the examination, your year-mark will not be taken into account and you will fail the module. Plagiarism Plagiarism is the act of taking words, ideas and thoughts of others and passing them off as your own. It is a form of theft which involves a number of dishonest academic activities. The Disciplinary Code for Students (latest version) is given to all students at registration. Students are advised to study the Code. Read the University's Policy on Copyright Infringement and Plagiarism as well. 10 AUI4863/102 PLEASE NOTE: Enquiries about assignments assign@unisa.ac.za. must be addressed to 8.2 Assignments and assessment methodology applicable only to AUI4863 Assignments 01 and 02 The due dates for assignments 01 and 02 and the unique codes for each assignment are set out in section 8.3 of this tutorial letter. If you use a wrong unique code we as lectures will never receive your assignment. Assignments 03 and 04 Very important -- the purpose of assignments 03 and 04 is to contribute towards your yearmark as well as is to build your own learning portfolio (class notes). The assignments will take you systematically through the whole syllabus. As soon as you complete a learning unit, you must save it on your computer (or write on an examination pad) before moving on to the next learning unit. In so doing, you will work consistently. You will feel good about yourself because you can see that you have progressed. Please work on your assignments on a weekly basis, you will not be able to complete your assignments over the weekend before the due date. The amount of reading and writing required in this module is simply too much and you will end up disliking the module if you postpone your efforts. Working through this module will require planning and consistent hard work on your part. You will have to take ownership of your responsibilities as a student and practice good time management skills. Unisa provides an open learning environment where you manage your own progress. Lecturers are not aware of your personal circumstances, so they cannot prescribe when you should do what. If you are working and have also registered for other modules, manage your available time carefully because this is not an easy module to pass. You are therefore required to schedule your own study programme with cognisance of the target dates (assignments and exams) and to discipline yourself to meet those dates. We encourage you therefore to take ownership of your own studies and your progress - it is in your hands. As you achieve your targets, you will become positive, focused and driven - the stuff internal auditors are made of. Although the university allows you to submit handwritten assignments we recommend that you rather record you work on the computer. By utilising the computer you become proficient in a word program and therefore improve your basic employability skills. Remember to accumulate all the activities applicable for an assignment and submit it as a single document. The due dates for all the assignments are non-negotiable therefore plan for the unforeseen and do not leave it until the last minute. 8.3 Due dates and unique assignment numbers In addition to the general assignment number (eg 01), each assignment has its own unique assignment number (eg 603355). This number must be written on the mark reading sheet or assignment cover page in the designated area. Refer to the following table for the unique numbers and due dates applicable to the assignments that you have to submit: 11 Assignment Due date 01 (Compulsory) (5 % of year mark) 25 May 2016 Unique number: 879827 Multiple choice questions. 02 (Compulsory) (5 % of year mark) 04 July 2016 Unique number: 715441 Multiple choice questions. 03: (5 % of year mark) 12 August 2016 Unique number: 743358 04: (5 % of year mark) 01 September 2016 Unique number: 804959 8.4 Submission of assignments You must submit assignments electronically via myUnisa in a PDF format (or post it). Assignments posted should be addressed to: The Registrar PO Box 392 Unisa 0003 To submit assignments using myUnisa: Go to http://my.unisa.ac.za Enter your student number and password Select the module. Click on assignments in the left-hand menu. Click on the assignment number you want to submit. Follow the instructions on the screen. 8.5 ASSIGNMENTS 8.5.1 COMPULSORY ASSIGNMENT 01 NB: This assignment is due on 25 May 2016 Special information on how to do this assignment: This assignment consists of 20 multiple-choice questions. (1) 12 Write the correct unique assignment number (879827) in the six blocks provided on the mark-reading sheet. AUI4863/102 (2) Write the ordinary assignment number (01) in the two blocks provided on the mark reading sheet. (3) Consult my Studies @ Unisa for an example of how a computer mark-reading sheet should be filled in. (4) If you do not follow these instructions, the computer will reject your answer sheet and it will be returned to you unmarked. Also consult my Studies @ Unisa when you answer multiple-choice assignments. 13 ASSIGNMENT 01: MULTIPLE-CHOICE QUESTIONS (compulsory) Unique number: 879827 (5% of the year mark if submitted on time) You cannot write the examination if this assignment is not submitted on time Refer to section 8.3 An important aim of this assignment is to admit you to the examination. If the assignment is not submitted on/before the due date you will not be able to write the examination. QUESTION 1 20 marks REQUIRED Select only one alternative for each question; and mark the digit that corresponds with the digit of the alternative of your choice on myUnisa. Answer the sub-sections of the question in numerical sequence, for example: 1. 2. 1 2 (1 mark per question) 1.1 14 Audit fieldwork has been defined as \"a systematic process of objectively gathering evidence about an entity's operations, evaluating it and determining whether those operations meet acceptable standards\". Which one of the following is not part of the work performed during the fieldwork phase? 1 Expanding or amending audit procedures if circumstances warrant it. 2 Applying the audit programme to accomplish audit objectives. 3 Creating working papers that document the audit work. 4 Developing a written audit programme. AUI4863/102 1.2 1.3 1.4 A significant portion of the internal auditor's working papers normally consist of the conclusions reached by the auditor regarding the audit area under review. In a situation where the supervisor does not agree with the conclusions reached, the auditor may be requested to perform additional audit procedures. If there is still disagreement on the conclusion reached after the auditor has conducted additional work, which of the following responses by the internal audit department would not be appropriate? 1 Both the internal auditor and the supervisor should document their reasons for reaching different conclusions. The rationale of each party should be included in the working paper files. 2 The disagreement should be noted and the notice of disagreement and followup work should be included in the working papers. 3 Both conclusions should be presented to the chief audit executive (CAE) for resolution. 4 Both conclusions should be included in the audit report and management and the auditee should respond to both. The primary purpose for internal auditors performing a follow-up review on an audit engagement is to ... 1 ensure the timeous consideration of the internal auditors' recommendations. 2 determine whether appropriate action was taken on their reported findings. 3 allow the internal recommendations. 4 document what action management is taking in response to the audit report and conclude the finding timeously. auditors to evaluate the effectiveness of their A follow-up review found that a significant internal control weakness had not been corrected. The CAE discussed this matter with senior management and was informed that management had agreed to accept the risk. The CAE should ... 1 do nothing further because management is responsible for deciding on the appropriate action to be taken in response to reported internal audit observations and recommendations. 2 initiate a fraud investigation to determine whether employees had taken advantage of the internal control weakness. 3 inform senior management that the weakness must be corrected and schedule another follow-up review. 4 assess the reasons why senior management decided to accept the risk and inform the board of senior management's decision. 15 1.5 1.6 1.7 16 During a preliminary review of an organisation's production plant, management declared that the selling of scrap materials is well controlled. Which one of the following audit procedures can be used to prove whether or not this is the case? 1 Compare current income from sales of scrap materials with that of other periods. 2 Conduct interviews with persons responsible for the gathering and storing of scrap materials. 3 Draw a comparison between the quantity of scrap material expected to result from production processes and the quantity sold. 4 Compare the results of a physical inventory count of scrap material on hand with perpetual inventory records. Which one of the following alternatives best describes the reason why, during an audit of inventory, an internal auditor compares the inventory turnover rate of a company with established industry standards? 1 In order to evaluate the accuracy of internal financial reports of the company. 2 In order to test the company's controls designed to safeguard assets. 3 In order to determine whether the company is complying with established procedures regarding inventory levels. 4 In order to assess the performance of the company and to indicate where additional audit work may be needed. Understanding the business process in an organisation involves ... 1 identifying and examining the key activities. 2 designing and implementing control structures. 3 defining performance objectives. 4 selecting control strategies. AUI4863/102 1.8 1.9 1.10 Continuous audits are viable only when ... 1 there is acceptance by management of the revised audit approach. 2 adequate staff training has taken place. 3 there is a high degree of automation of the business processes. 4 All of the above. Internal auditors should develop and record a plan for each audit engagement. The planning process should include all of the following except ... 1 establishing engagement objectives and the scope of work. 2 obtaining background information about the activities that will be reviewed. 3 identifying sufficient information to achieve engagement objectives. 4 determining how, when, and to whom the engagement results will be communicated. For forensic evidence to remain acceptable after it has been gathered, it must... 1 never leave the hands of the auditor. 2 immediately be transferred to police custody. 3 immediately be transferred to the external auditors. 4 be maintained with a full chain of custody. 1.11 Internal auditors realise that at times corrective action is not taken even when it has been agreed to by the appropriate parties. This should lead an auditor to ... 1 decide on the extent of necessary follow-up work. 2 allow management to decide when to follow-up. 3 decide to conduct follow-up work only if management requests the auditor's assistance. 4 write a follow-up audit report with all the findings and their significance to the operations. 17 1.12 Which one of the following factors would most likely prevent the internal auditor from using monetary unit sampling? 1 The auditor expects to find a limited number of understatements of individual accounts balances. 2 The auditor expects to find that a large percentage of sampled items have misstatements. 3 Individual accounts are not assigned a number, but are listed only alphabetically. 4 The auditor expects to find more errors in the larger rand value items than in the smaller rand value items. 1.13 Analytical procedures ... 1.14 18 1 are considered direct evidence of the assertion being evaluated. 2 are compelling evidence when they involve re-computation. 3 may provide the best available evidence for the completeness assertion. 4 are not sufficient by themselves for management assertions, but should be used in fraud investigations. To verify an item during the performance of audit procedures on a population for which the actual value of the population is not known, but the precision limits and confidence levels are determinable, the most suitable method of statistical sampling which can be used is ... 1 estimation sampling for attributes. 2 estimation sampling for variables. 3 monetary unit sampling - discovery of a monetary error. 4 monetary unit sampling - discovery of a compliance error. AUI4863/102 1.15 1.16 1.17 Contributions to a non-profit organisation have been constant for the past three years. The audit committee is concerned that the Head of the organisation may have embarked on a scheme in which some of the contributions from the many sustaining members have been redirected to other organisations. The audit committee suspects that the scheme may involve taking major contributions and depositing them in alternative accounts, or soliciting contributions to be made in the name of another organisation. Which one of the following audit procedures would be the most effective in detecting the existence of such a fraud? 1 Use generalised audit software to take a sample of pledged donations not yet collected and confirm the amounts due with the donors. 2 Take a sample, which includes all large donors over the past three years and a statistical sample of other donors, and request a confirmation of total contributions made to the organisation or affiliated organisations. 3 Take a discovery sample of cash receipts and confirm the amount of the receipts with the donors. Investigate the differences. 4 Use analytical review procedures to compare the contributions generated with those of other comparable institutions over the same period of time. If the amount is significantly less, take a detailed sample of cash receipts and trace them to the bank. The identification of damaged and obsolete inventory is of importance when determining the value of inventory. The best auditing procedure to discover obsolete inventory included in closing inventory is ... 1 to compare the physical quantities of slow-moving items with corresponding quantities of the previous year. 2 to review management's inventory certificate for accuracy. 3 to inspect inventory during the physical inventory count. 4 to test the overall fairness of the inventory values by comparing the company's inventory turnover ratio with the industry average. One reason why the internal auditor performs an analytical review of financial activities is to identify possible ... 1 weaknesses of a material nature in the system of internal control. 2 unusual transactions. 3 non-compliance with prescribed control procedures. 4 inadequate separation of accounting and other financial duties. 19 1.18 1.19 1.20 20 The identification of an appropriate population for a sample will depend on the audit objective. Which one of the following audit objectives would be appropriate if the population consists of entries in an asset repairs expense file for the period under review? 1 To ensure that the recorded repair expenditures for fixed assets have been properly approved. 2 To ensure that all non-capital repair expenditures have been properly charged to expenses. 3 To ensure that non-capital repair expenditures have been recorded in the proper period. 4 To ensure that expenditures for fixed assets have been recorded in the proper period. Which one of the following statements would be a valid reason for the internal audit department not to participate in the system development process? 1 Participation would affect audit independence. 2 Participation would delay implementation of the project. 3 Participation would make the auditor a partial owner of the application. 4 None of the options listed. An internal auditor is conducting an operational audit of the information systems (IS) department. Which one of the following factors carries the most weight in evaluating the effectiveness of the IS department? 1 The objectives and goals of the IS department are consistent with the overall objectives of the organisation. 2 The IS department has a large complement of technical staff in comparison with its administrative staff. 3 The IS department is given top priority in the budgeting process. 4 The IS department uses leading-edge technology in comparison with other information systems departments in the industry. AUI4863/102 8.5.2 COMPULSORY ASSIGNMENT 02 NB: This assignment is due on 4 July 2016 Special information on how to do this assignment: This assignment consists of 20 multiple-choice questions. (1) Write the correct unique assignment number (715441) in the six blocks provided on the mark-reading sheet. (2) Write the ordinary assignment number (02) in the two blocks provided on the mark reading sheet. (3) Consult my Studies @ Unisa for an example of how a computer mark-reading sheet should be filled in. (4) If you do not follow these instructions, the computer will reject your answer sheet and it will be returned to you unmarked. Also consult my Studies @ Unisa when you answer multiple-choice assignments. ASSIGNMENT 02: MULTIPLE-CHOICE QUESTIONS Unique number: 715441 (5% of the year mark if submitted on time) You cannot write the examination if this assignment is not submitted on time Refer to section 8.3 An important aim of this assignment is to admit you to the examination. If the assignment is not submitted on/before the due date you will not be able to write the examination. QUESTION 1 20 marks REQUIRED Select only one alternative for each question; and mark the digit that corresponds with the digit of the alternative of your choice on myUnisa. Answer the sub-sections of the question in numerical sequence, for example: 1. 2. 1 2 (1 mark per question) 21 1.1 Which one of the following forms of audit evidence could be considered by the internal auditor to be the most reliable? 1 A sales invoice of the organisation together with a delivery note signed by the customer. 2 Direct confirmation from a debtor of his account balance after the internal auditor has mailed the account personally to the debtor. 3 A crossed cheque which is forwarded together with the bank statement directly to the internal auditor. 4 A pay-sheet prepared by the wage clerk and checked and approved by the accountant. 1.2 Recommendations in audit reports may or may not actually be implemented. Which one of the following best describes the role of internal auditing in following up on audit recommendations? 1 Internal auditing has no role. Follow-up is solely the responsibility of management. 2 Internal auditing is responsible for the implementation of recommendations. 3 Internal audit should follow up to ensure that appropriate action is taken in the areas for which recommendations were issued. 4 The internal auditors should request the external auditors to follow up on the recommendations so as to ensure that they maintain their independence. 1.3 Which one of the following statements is true regarding the use of observation as an audit technique? 22 1 It is the most effective method to use during the completion of internal control questionnaires. 2 It is the most persuasive method to use for learning how transactions were really processed during the period under review. 3 It serves mainly to satisfy the audit assertion, 'existence', as it rarely satisfies any other assertion. 4 It is the most persuasive method to use for determining if fraud has occurred. AUI4863/102 1.4 Select the most appropriate alternative to complete the following sentence. The internal auditor cannot normally rely on his examination and testing of the adequacy and effectiveness of the system of internal control ... 1 to ascertain whether the system is functioning as intended. 2 to help him to determine the extent of other audit procedures that must be applied. 3 to prove beyond any doubt that misappropriation of assets has been perpetrated. 4 to ascertain whether the system established provides reasonable assurance that the undertaking's control objectives will be met. 1.5 A manufacturing firm uses hazardous materials in the manufacturing of its products. Which of the following activities might form part of an audit of the handling of hazardous materials by the company? (i) Recommending an environmental management system as part of policies and procedures. (ii) Verifying the existence of records to track the movement of hazardous materials from their manufacturing to their destruction. (iii) Using consultants to avoid self-incrimination of the firm in the event that illegalities were detected in an environmental audit. (iv) Evaluating the amounts provided for in an environmental liability accrual account. 1 (ii) only 2 (i) and (ii) 3 (iii) and (iv) 4 (i), (ii) and (iv) 1.6 Which one of the following statements would be a valid reason for the internal audit department to refuse any participation in the system development process? 1 Participation would affect audit independence, and the auditor would not be able to perform an objective review after the system has been implemented. 2 Participation would delay implementation of the project. 3 Participation would make the auditor a partial owner of the application, and the auditor would then have to share the blame for any problems that remain in the system. 4 None of the options listed. 23 1.7 Which one of the following aspects will an auditor not consider when making a decision in connection with the selection of working paper software? 1 The cost of the software. 2 The hardware requirements. 3 The installation requirements. 4 The level of computerisation of the auditee. 1.8 Select the most appropriate alternative to complete the following sentence. The primary purpose of generalised audit software is to allow the auditor to ... 1 use the auditee's employees to perform routine audit checks of the electronic data processing records that otherwise would be done by the auditor's staff accountants. 2 test the logic of computer programs used in the auditee's electronic data processing systems. 3 select larger samples from the auditee's electronic data processing records than would otherwise be selected without the generalised program. 4 independently check the auditee's electronic data processing records. 1.9 An internal auditor is conducting an operational audit of the information systems department. Which one of the following factors would the auditor give the most weight to in evaluating the effectiveness of the department? 24 1 The objectives and goals of the department are consistent with the overall objectives of the organisation. 2 The department has a large complement of technical staff compared to its administrative staff. 3 The department is given top priority in the budgeting process. 4 The department uses leading-edge technology compared to other information systems departments in the industry. AUI4863/102 1.10 Which one of the audit procedures performed during the conduct of an operational audit was aimed at the evaluation of the economy and efficiency with which resources are being utilised within the organisation? 1 Verify the existence and safeguarding of fixed assets. 2 Interview the head of the personnel department to determine whether proper operational standards exist and are adhered to in the organisation. 3 Meet with the external auditors and financial management on the valuation of fixed assets. 4 Check the accuracy of production figures on quarterly reports, for submission to the board of directors. 1.11 The chief audit executive (CAE) routinely provides quarterly activity reports to the board at board meetings. Senior management has asked to review the CAE's board presentation before each board meeting so that any issues or questions can be discussed beforehand. How should the CAE react to senior management's request? 1 He should disclose to the board only those matters in the activity reports which pertain to the expenditures and financial budgets of the internal audit department. 2 He should not provide activity reports to senior management, because such matters are the sole responsibility of the board. 3 He should provide the activity reports to senior management as requested and discuss any issues which may require action to be taken. 4 He should provide senior management only with information that pertains to completed audits and findings available in published audit reports. 1.12 Where an auditee's operating standards are vague and subject to interpretation, the internal auditor should ... 1 seek agreement with the auditee about which standards are to be used to measure operating performance. 2 determine industry best practice in this area and use this as the standard for measuring operating performance. 3 interpret the standards in the strictest sense possible, because standards are only the minimum acceptable measures of performance. 4 ignore any comments on standards and the auditee's performance in relation to those standards, since such an analysis would be meaningless. 25 1.13 The CAE is reviewing recent reports that recommend additional audits owing to the company's increased exposure to risk. Which of the following represents the greatest risk to the company and should therefore be included in the next audit? 1 Three pre-numbered receiving reports have gone missing. 2 Several purchase orders have been issued without purchase requisitions. 3 Payment has been made for routine inventory items without a purchase order or receiving report. 4 On several occasions, cash receipts have been held over for an extra day before being banked. 1.14 Indicate the combination of factors that best completes the factors to be considered when evaluating audit risk in a functional area: I. volume of transactions II. degree of system integration III. years since the last audit IV. significant management turnover V. rand value of assets at risk VI. average value per transaction VII. results of the last audit 26 1 I, II, III, IV, V, VI and VII 2 II, IV and VII 3 I, V and VI 4 III, IV and VI AUI4863/102 1.15 An internal auditor is assigned to conduct an audit of the security of a local area network (LAN) in a company's finance department. Investment decisions, including the use of hedging strategies and financial derivatives, use data and financial models that run on the LAN. The LAN is also used to download data from the mainframe to help with these decisions. In determining the scope of the audit, which of the following items should be considered to be outside the scope of the security audit? 1 Investigation of the physical security over access to LAN components. 2 The ability of the LAN application to identify data items at the field or record level and implement user access security at that level. 3 Interviews with users to determine their assessment of the level of security in the system and the vulnerability of the system to being compromised. 4 The level of security of other LANs in the company that also utilise sensitive data. 1.16 A systems engineer applies for a position within the internal audit department of an information technology company. The engineer became interested in the position after assisting several internal auditors while they were auditing the information technology department. The CAE ... 1 should not employ the engineer because of his lack of knowledge of the IIA Standards. 2 may hire the engineer despite his lack of knowledge of the IIA Standards. 3 should not hire the engineer because of his lack of accounting knowledge. 4 may hire the engineer because of his knowledge of internal auditing gained in the previous position. 1.17 Information systems (IS) risks should be ... 1 controlled at all costs. 2 eliminated completely. 3 accepted as a normal part of conducting business. 4 subject to a management control process. 27 1.18 When concerned with the validity of certain recurring transactions, which one of the following computer-assisted audit techniques (CAATs) would allow the auditor to select predefined transactions for audit during normal processing? 1 Extended records. 2 Tracing. 3 Mapping. 4 Embedded audit data collection. 1.19 The greatest impact that information technology has had on the audit process is its use ... 1 in tracking personnel performance and the development of audit staff. 2 in the audit reporting process, such as automated working paper packages. 3 in conducting audits by utilising various computer-assisted audit techniques. 4 as a strategic tool to develop the audit plan. 1.20 Generalised audit software can be used to ... 28 1 examine the existence and consistency of data maintained on files. 2 perform concurrent auditing of data files. 3 verify processing logic of operating systems software. 4 access complex data structures without using host language extensions. AUI4863/102 8.5.3 ASSIGNMENT 03 NB: This assignment is due on 12 August 2016 Special information on how to do this assignment: This assignment consists of four essay questions with subsections. You must complete all the questions in the assignment to earn the full 5% for this assignment. Only a selection of the questions will be assessed by the lecturers. Model answers for all the questions will however be made available on MyUnisa after the due date for the assignment and you can refer to these answers to do your own assessment of any questions that have not been assessed by the lecturer. (1) Write/type the correct unique assignment number (743358) in the six blocks provided on cover sheet for the assignment. (2) Write the ordinary assignment number (03) in the two blocks provided on the cover sheet for the assignment. (3) If you do not follow these instructions, the computer will reject your answer sheet and it will be returned to you unmarked. Also consult my Studies @ Unisa when you answer multiple-choice assignments. ASSIGNMENT 03: Unique number: 743358 (5% of the year mark if submitted on time) Refer to section 8.3 QUESTION 1 36 marks Maxiform (Pty) Ltd is a company that prints and distributes business forms, stationary and documents. Kevin Kwantas, the current managing director and majority shareholder registered the company about fifteen years ago. The company's only other directors are the operations director and the marketing director. The company's IT section consists of four employees each of whom has a good general understanding of computers including some knowledge of systems development and programming. 29 The IT section was headed by Vicky January, but about a year ago he left to work for a large company as its IT manager. During his employment at Maxiform (Pty) Ltd, Vicky January developed all the existing accounting systems and wrote the software for the various cycles. He was also responsible for running the company's local area network and had absolute control over all matters relating to computers. Claiming copyright for all the systems he has developed, he took all the systems documentation with him when he left and agreed to avail himself after hours to attend to any major problems Maxiform (Pty) Ltd might experience with their accounting systems. As a result of this arrangement, Maxiform (Pty) Ltd decided not to replace Vicky January. However, the fourth member of the IT department was appointed on the departure of Vicky January. The task of finding this person was left to the three other IT employees with the instruction from Vincent Oliver, the company accountant, that they should \"get one of their friends to join the department.\" Without an IT manager, the four employees in the computer section now report to the production manager who has a sound knowledge of the technical side of computing with regard to technical computer matters, (for example new equipment purchase and installation) and to Vincent Oliver who has little computer knowledge about matters relating to the accounting cycles (for example programme changes). Although the four IT employees report to the production manager and Vincent Oliver, they are not closely supervised by either, resulting in the IT staff generally managing their own time and activities. Kevin Kwantas pays little attention to the company's computer needs as he has \"more interesting things to do\". Maxiform (Pty) Ltd runs its accounting cycles on a local area network. Between 35 and 40 staff members are linked to the network to fulfil their functions relating to the accounting cycles, each with their own desktop computer. In addition there are a number of computers on the network located in a large office along with the network's servers and printers (there are no printers in the various departments). This general office is not access controlled as staff members must be able to collect printed documents as required. All employees have access to the general office computers so that they can send e-mails and search the internet during their lunch breaks. Access to the network is controlled by the use of user identification and passwords. Employees are required to enter a departmental password (each department has its own password) to gain access to the applications used by their department; for example, the password to access the wages application is \"payroll\". Once the employee has accessed the application a further password may be required for some of the modules within the application, like the employee master file. (Graded Questions adapted) REQUIRED Marks 1.1 Briefly describe four (4) components of the COSO Integrated Framework. 1.2 Identify and discuss the internal control weaknesses in the general controls evident from the information provided. 30 (6) (30) AUI4863/102 The scenario reflected below relates to questions 2 and 3. SCENARIO PERTAINING TO QUESTIONS 2 AND 3 With the introduction of e-learning and the problems associated with the increase of international providers of online tertiary education, especially with regard to the lack of accreditation and recognition by South African employers, the founders and owners of the Virtual Open University (Pty) Ltd, trading as Virtual Open University (VOU), have realised that there was a gap in the market for the development and delivery of an educational product, customised to the needs of the South African market. In 1998, the VOU was established as a privately owned virtual university, operating from the Western Cape. The founders of the university were all previously employed as professors at other South African universities. Their functional disciplines were in a variety of businessrelated areas, including marketing, information technology, accounting, organisational development, strategic management and operations management, and they have come to be regarded as experts in their respective fields. After receiving the necessary accreditation from the Department of Education (DoE), VOU commenced operating as a university in 2000, delivering its product offerings to interested students. QUESTION 2 27 marks Refer to the given scenario and the following information, to answer this question. When the VOU was originally established, the relatively small student numbers and the need to drive the operational plan actively meant that the founding directors were extensively involved in all areas of the business as well as in establishing and embedding the systems, procedures and controls. As the business volumes started to grow, specialist support staff was employed to administer and operate the systems. Therefore, despite still being involved at a high level, much of the directors' former administrative and management responsibilities have now been delegated to employees. However, the new resourcing plan did not result in changes to procedures and controls. The existing systems were merely adapted to accommodate the additional staff. Realising that this is not an ideal situation and that systems, procedures and controls may no longer support optimal performance, the board has requested the internal audit department to conduct an audit on the performance of the strategic administrative systems of VOU. As the Chief Audit Executive (CAE) of VOU, you have decided to perform an operational audit, with the first phase of this audit focusing on the overall functioning of the administrative activities of VOU. REQUIRED 2.1 2.2 Marks In your own words, clearly distinguish between the operational auditing concepts of economy, efficiency and effectiveness. (6) For each of the concepts described in 2.1, identify three (3) audit objectives that will guide the auditors in performing the operational audit on (9) 31 the overall functioning of the administrative activities within VOU. 2.3 For each of the objectives you mentioned 2.2, fully describe an audit procedure that will enable the auditors to eventually draw a conclusion on the economy, efficiency and effectiveness of the administrative activities within VOU. (12) Structure your answers to questions 2.2 and 2.3 in the following format: 2.2 Audit objectives QUESTION 3 2.3 Audit procedures 32 marks Read the scenario on page 31 as well as the following information to answer question 3. All student registrations are processed on the student system, which is integrated into the student fees system. At the end of each month, an automated program is run which accumulates the relevant subject fees from the integrated student system for all student registrations during that month. Prior to implementation, the integration of the student system and the student fees system and the transfer of data between the two systems were extensively tested, with no errors being noted. The registration fees for all subjects offered by VOU are the same, namely, R5 000 each. In other words, where a student registers for five subjects, the student fee for that student will be R25 000 for the year. As part of the registration process, each student must either present a valid credit card, or provide credit card details to guarantee payment, or complete a credit application form. The credit application form must be signed either by themselves, their parents, sponsors or employers (whoever will be responsible for payment of the account). After approval and finalisation of a student's registration on the student system, that student's information is automatically transferred to the integrated financial system. Based on the student registration information, including the cost of the respective subjects, the financial system automatically performs a credit rating on each registration. Where the credit scoring yields a positive result, the financial system automatically credits the student fee income account and debits the individual student fee debtors account. Where the credit application is rejected, the potential student is requested to provide additional information/documentation and/or guarantees. After processing the registration application, each student's file is sent to the student fee accounts department. On a weekly basis, the student fee manager reviews all student fee accounts that have passed the initial credit rating and provisionally approves the student's registration. In addition, all rejected applications are also reviewed against the additional documentation (where provided), also on a weekly basis. Based on the review of rejected credit applications, the student fee manager may override the previously rejected application by entering his or her unique user identification and password. 32 AUI4863/102 Monthly statements reflecting student indebtedness are sent to all students with outstanding fees. A letter of demand is sent to all students with accounts outstanding for more than 60 days. A final letter of demand is sent to all students with accounts outstanding for more than 90 days. Accounts outstanding for more than 180 days are handed over to the university's attorneys for collection. In terms of VOU's credit policy, all accounts settled in full within 30 days of registration will attract no interest. Thereafter, any accounts that are outstanding will attract interest calculated at prime plus 5%. Accounts outstanding for more than 180 days (that have been handed over to the attorneys) will attract penalty interest of an additional 5% as well as the direct costs of any legal fees. At the end of each month, the student fee manager reviews the aging of the student fee debtors' accounts and determines whether the relevant sections of the policy have been applied consistently. The student fee manager considers the motivation for any exceptions to the established credit policy accounts before approving or rejecting the deviation. At the end of each month, the director of students reviews and approves all changes to the subject price master file. Despite the revenue growth, one of the most significant operational risks identified by the board of directors has been the recent increase in the value of both the student fee debtor's accounts and potential bad debts, and student fee bad debts. As a result, you have been requested to conduct an audit on revenue and accounts receivable. REQUIRED 3.1 Marks Identify and explain two (2) audit assertions that will be tested in a financial audit at the end of the accounting period under review for each of the following: revenue account total receipts account total accounts receivable balance (3) (3) (3) NOTE: The same assertion should not be repeated under the different accounts. 3.2 3.3 Clearly describe six (6) analytical review procedures that could be performed to assess the reasonableness of the student fee revenue recorded for the current year. (9) Describe fourteen (14) audit procedures where generalised audit software (GAS) can be used to audit VOU's accounts receivable balance at a given date. (14) 33 QUESTION 4 19 marks You are the chief audit executive (CAE) of Foresure Limited. During your review of the working papers prepared by your staff during the last two months, you extract the following information from the working papers: Transaction A Due to a shortage of cement in South Africa the company imported the cement needed to build its new office buildings directly from China. The cement did comply with the SABS quality requirements pertaining to cement used in the construction of a multi-storey building. As the company in China only sells cement by shipload, one shipload of cement was imported. A shipload of cement was enough for 68% of the cement needs of the whole construction. The contractors stated that it would be possible to purchase the rest of the cement locally. The analytical review procedures performed show that cost of the imported cement was R48 per bag and the cement purchased locally was R58 per bag. Transaction B An analytical review that matched the printer cartridges to the different printers highlighted that the company purchase printer cartridges for printers not owned by the company. Transaction C While conducting the wage payout at the factory on behalf of the factory foreman who was in a serious vehicle accident, the internal auditor was surprised by all the workers who enquired where the \"pot\" was. He subsequently discovered that the factory foreman runs a \"pot\" which was voluntary for all the factory workers. Participants entered R5 into a pot with a piece of paper with their name. A winner would be drawn immediately after the wage payout. The winner would get the wage check of the factory foreman and the factory foreman would keep the money in the pot. The wage of a factory foreman is R2 500 per week and there are 1 000 workers in the factory who all earn about R1 000 per week. REQUIRED Marks 4.1 4.2 4.3 34 State whether or not each of the transactions described above should be seen as a red flag possibly indicating fraud or other unethical conduct and motivate your answer. (6) Describe the audit procedures you would perform to further investigate transaction B. (8) Describe the factors that can motivate people to commit fraud or the most common causes of fraud by an individual. (5) AUI4863/102 8.5.4 ASSIGNMENT 04 NB: This assignment is due on 1 September 2016 Special information on how to do this assignment: This assignment consists of three essay questions with subsections. You must complete all the questions in the assignment to earn the full 5% for this assignment. Only a selection of the questions will be assessed by the lecturers. Model answers for all the questions will however be made available on MyUnisa after the due date for the assignment and you can refer to these answers to do your own assessment of any questions that have not been assessed by the lecturer. (1) Write/type the correct unique assignment number (804959) in the six blocks provided on cover sheet for the assignment. (2) Write the ordinary assignment number (04) in the two