PQR is a small, listed company manufacturing and selling a wide range of automotive components to the major vehicle assemblers. The company sells numerous components to 750 local and regional retail customers. The Accounts Receivable Department of PQR has six staff who process all receipt invoices and receive the payments from the customers. The internal audit team of the company is preparing the internal audit engagement plan for Accounts Receivable department. The team of internal auditors have gathered following information regarding Accounting Receivable department of PQR. A. Business Objective Sales orders are verified, validated, and approved. Inherent risk Identified related to above business objective are as follows,

i. Incomplete and inaccurate customer orders. The impact of occurrence is High, and the likelihood of occurrence is Medium. ii. Sales to customers with poor credit The impact of occurrence is High, and the likelihood of occurrence is High.

iii. Producing fictitious sales order by sales staff The impact of occurrence is Medium, and the likelihood of occurrence is Low. B. Business Objective Sales Invoices are appropriate and authorized. Inherent risk Identified related to above business objective are as follows,

i. Incomplete and inaccurate generation of sales invoices The impact of occurrence is Medium, and the likelihood of occurrence is Medium.

ii. Producing fictitious invoices that are not reviewed and approved by appropriate personnel. The impact of occurrence is Low, and the likelihood of occurrence is Low. C. Business Objective Timely collection of receipts and recording Inherent risk Identified related to above business objective are as follows, i. Without proper cutoff, an overstatement of accounts receivables and revenue. The impact of occurrence is High, and the likelihood of occurrence is Low.

ii. Account receivable department employees steal collections due to lack of segregation of duty. The impact of occurrence is Low, and the likelihood of occurrence is High. Assume you are part of the internal audit team at PQR Plc.

1. prepare the Risk and Control Matrix and Risk Heat Map. (15 marks)

2. Advise the internal audit team the risks that the internal auditors should prioritized during the audit at accounts receivable department at PQR Plc. (5 marks) (Maximum word limit 150 words)

3. Discuss the negative consequences faced by the internal audit department if they fail to properly establish engagement objectives and engagement scope.