Q1: Using the TARA and ALARP models, identify the key risk factors that AUDIT OF PRODUCTION, FINANCIAL AND REPUTATIONAL RISKS should be included in the internal audit of the supply chain. (Professional Skills: AT SOUTHERN CROSS TOYS COMPANY demonstrate your evaluation skills in assessing the key risk factors to be considered). The board of directors of Southern Cross Toys, a medium sized soft toys manufacturing company based in Sydney, has decided to ask their internal Transfer. audit committee to carry out a detailed audit of risks within the business and Avoid: its supply chain. Unforeseen risks have crystallised recently that have cost Southern Cross Toys a Reduce: large amount of money. This business has always placed a high level of Accept: importance on monitoring the quality of its finished products. Most of the internal audit department's work has been focussed on ensuring that the quality control processes are carried out properly. Despite this, a batch of new toys called Bounce Back boomerangs', made of a new and very soft type of imported plastic, Q 2: Explain to the Board that external auditors must ALSO be used to had to be taken off the market and buyers refunded because of a toxic independently review the internal risk audit of the supply chain. substance that was discovered in the soft plastic. This new kind of plastic was (Professional skills marks: demonstrate your communication skills in not fully safety tested as part of the finished product check. persuading Ms Gurung, the CEQ and the Board to use external auditors.) The raw material cost of the new plastic also increased dramatically due to an unforeseen 500% increase in shipping costs as a result of the Covid pandemic. Both issues - the faulty new product, and rising transport costs - were made worse Q 3: Challenge Ms Gurung's assumption that this internal risk audit of the supply by the rapid growth the business experienced when sales of 'Bounce Back chain will only need to be reviewed annually. Prove to her why it may need to be boomerangs' reached unexpectedly high online sales levels after it was adopted reviewed more frequently. as a symbol of the youth protest movement against recent Climate Change (Professional skills marks: demonstrate scepticism skills in challenging Ms catastrophes in Australia. Gurung's views.) The head of the internal audit committee, Finance Manager Ms Gurung, is instructed by the Board and the CEO to supervise a new risk audit of the supply chain. She requests permission to recruit extra staff to carry out this extensive risk audit work. However, she thinks that the extra staff will only need to be appointed on temporary contracts, because the detailed risk auditing of the supply chain should only need to be carried out once. Then after it is completed, it should only need to be updated annually to include any major changes to inputs and logistics. Required: YOU are a 'rising star' accountant in Southern Cross Toys. Ms Gurung asks you to assist her by drafting the comprehensive risk audit report that must be presented to the Board