Individual Project Rubric

Grading Criteria

Percentage

Deliverable requirements addressed; understanding of material and writer's message and intent are clear.

40%

Calculation methods, where required, are contextually appropriate, fully explained, and presented in a manner that is easy to understand.

10%

External research incorporated in the paper, if any, supports the writer's position and is properly acknowledged, and cited direct quotations may not exceed 10% of the word count of the body of the assignment deliverable (excluding title page, abstract, table of contents, tables, exhibits, appendices, and reference pages). Inclusion of plagiarized content will not be tolerated and may result in adverse academic consequences.

5%

Critical thinking: Position is well-justified, there is logical flow, and there are examples.

20%

Structure: Includes introduction and conclusion, proper paragraph format, and reads as a polished, academic paper or professional presentation, as appropriate for the required assignment deliverable.

10%

Mechanical: No spelling, grammatical, or punctuation errors.

10%

APA: Deliverable is cited properly according to the APA Publication Manual (6th ed.).

5%

Type: Individual Project Unit: Capital Project Controls and Reporting Deliverable Length: Word document of 2-3 pages Assignment Objectives Describe risks and internal controls when implementing a capital planning process. Assume that you applied for a position in UPC's internal audit department after 5 years in the finance department. As a senior internal auditor, one of your assignments is to design and implement controls over capital budgets and review control effectiveness. Your company is required by the Sarbanes Oxley Act of 2002 (SOX) to report material weaknesses in internal controls. You created the attached spreadsheet to verify the growth rate used in calculating cost of capital. You identified many inconsistencies with the data used by the finance department. The discrepancies led to a higher cost of capital for the truck replacement project. Therefore, UPC decided to lease trucks instead. Further, you are aware that the finance director is the one who approves capital projects and makes procurement and leasing decisions. The finance director owns a truck leasing company, and proposals have been received from his leasing company. You have been instructed to respond to the following tasks: Identify and explain 5 or more audit objectives for UPC's capital plans. Provide a report of your audit, and discuss any SOX reportable issues. Recommend internal controls to address identified and perceived control weakness in UPC capital plans. Some managers have complained that the process of accepting projects does not consider qualitative factors. What qualitative factors will you recommend? Are there any associated risks? Internet Research Results Check the Cash Flow Statement for Dividends Paid Result: dividends were paid in 2008, 2009 and 2010 or 3 consecutive years Under \"Company\Internet Research Results Check the Cash Flow Statement for Dividends Paid Result: dividends were paid in 2008, 2009 and 2010 or 3 consecutive years Under \"Company\Internet Research Results Check the Cash Flow Statement for Dividends Paid Result: dividends were paid in 2008, 2009 and 2010 or 3 consecutive years Under \"Company\Running header: UPC CAPITAL PLAN 1 UPC CAPITAL PLAN Name Course Institution Date Running header: UPC CAPITAL PLAN 2 UPC CAPITAL PLAN 1. UPC's Capital Plan Audit Objectives The audit objectives for UPC's capital plan are as follows [the13]; a) To evaluate whether the capital plan is functioning as planned, b) To assess whether the current controls, processes and procedures, measures of performance, and resources are sufficient for effective running of the plan, c) To verify that the capital plan follows the outlaid processes and procedures, and measures of performance, d) To find ways through which the controls, processes and procedures, and measures of performance of the capital plan can be improved or modified, e) To benchmark the internal controls against global standards governing such capital plans, and f) To assess the viability and adequacy of the controls, processes and procedures, and measures of performance for the future of the capital plan. 2. UPC's Capital Plan Audit report The Sarbanes-Oxley Act of 2002 (SOX) needs the corporations that are publicly traded to form controls, processes and procedures, and measures of performance and assess their efficiency to ensure their adherence to the law. The internal controls of UPC's capital plan should, therefore, be designed and implemented in a manner that ensures that the operations of the plan are effective and efficient. Also, the internal controls should ensure that operations of the plan are geared towards the achievement of the plan's objectives. According to the audit assessment carried out, there were numerous irregularities with the data used by the finance department. As a result, the cost of capital used to evaluate the capital plan was high due to the use of a wrong growth rate as seen from the computation of the new growth rate. Thus, UPC leased trucks instead of replacing them. Also, it was noted that proposals Running header: UPC CAPITAL PLAN 3 from a leasing company owned by the director were received, while the finance director is the one responsible for approval of capital projects and making procurement and leasing decisions. From the observations, there exists gaps to the internal controls of the UPC's capital plan. One weakness is at the level of data entry used by the finance department, indicating that controls pertaining to data are not followed, or are inadequate to guarantee accurate data capture. Also, there is a control gap on approval of capital projects and decision making for procurement and leasing. As it is there seems to be lack of controls on matters approval of capital projects or that, the controls laid out are not followed. In matters decision making for procurement and leasing decision making, the supplier selection criteria is also insufficient and the processes may be subject to manipulation as only one person undertakes the processes. 3. UPC's Capital Plan Internal Controls Recommendations The following are recommendations that can be used by UPC to improve on its internal controls for the capital plan [unr16]; a) Segregation of duties: The firm should have a maker, checker and verifier for the data entry processes to ensure that data is keyed in consistently. As a result, further computations will be consistent with the firm's records. b) Review of postings: The firm should ensure that all data entry postings are to ensure that the data used is in consistence with the firm's records, hence deter manipulation of further computations. c) Form a committee that approves authorises capital procurement and leasing decisions: The committee will ensure that capital decisions are evaluated correctly so that the firm undertakes projects that maximises its wealth. Also, the committee will ensure that suppliers of outsourced services are vetted to ascertain their capacity to deliver thus eliminating favouritism. Running header: UPC CAPITAL PLAN 4 4. Qualitative Factors to Consider in Accepting Capital Projects for UPC and their Associated Risks The following are the qualitative factors that UPC would need to consider while selecting its capital projects [inf14]: a. Availability of qualified personnel: The firm should ensure that the personnel handling the capital projects have technical skills and competencies, to ensure that the financial decisions are arrived at correctly, evaluating all alternatives appropriately so that the firm can execute the most viable project. Also, the personnel should be of high integrity so as to safeguard the interests of the firm always as opposed to pursuing their personal interests. b. The motivation and morale of employees: The firm should ensure that the needs of their employees are well taken care of so as to improve their motivation when carrying out projects. Highly motivated employees are always productive; hence the projects will be successful. On the contrary, unmotivated employees are less productive, and could frustrate the success of the projects in ways such as manipulating the operations of the projects for selfish gain. c. Availability of adequate capacity: The firm should ensure that the required number of workers is available to optimise the operations of the projects. Having few employees than required could lead to work overloads on the available employees, leading to demotivation and poor performance. d. Strategic fit: The firm should also ensure that the project selected fits into the future strategy of the firm so as to maintain the firm's strategic direction. The following are the associated risks to the qualitative factors stated above [inf14]; a. The firm may have to increase on its payroll budget to cater for the additional expertise, morale boost and capacity of the employees. Running header: UPC CAPITAL PLAN 5 b. The firm may overly on the employees' capacity to evaluate capital projects, hence the need for internal controls. c. The employees may pursue their personal interests despite the firm's actions to cater for their welfare. d. The firm may not have adequate resources to cater for project needs adequately. REFERENCES inflibnet.ac.in. (2014). Retrieved December 29, 2016, from inflibnet.ac.in: http://shodhganga.inflibnet.ac.in/bitstream/10603/43628/14/14_chapter%208.pdf theiia.org. (2013). Retrieved December 29, 2016, from theiia.org: https://chapters.theiia.org/sandiego/Documents/Presentations/Capital_Project_Control.pdf unr.edu. (2016). Best Practices and Internal Control. Retrieved December 29, 2016, from unr.edu: practices http://www.unr.edu/campus-business/units-and-services/campus-audit/best