QUESTION 1 (30 MARKS) Disaster recovery plan You are the external auditor of ABC Ltd, a business offering consultancy services, that is highly dependent on its computer systems. In view of the 11 September attacks on the World Trade center in New York, management is concerned that, as the companys operations are concentrated in a prominent building, the business may be vulnerable to a disaster. The spate of biochemical threats, such as threats, such as anthrax attacks, that have the potential to cause severe illness and to require the immediate evacuation of buildings, are particularly disturbing. Therefore, the management of ABC Ltd performed a rigorous test of the companys disaster recovery plan by simulating full-scale disaster. The technical information technology (IT) aspects of the plan worked adequately and the computer systems were restored within the expected, albeit lengthy, timeframe. However, the simulation indicated a potential for breakdowns in the operation of normal financial controls during such a disaster situation. in view of these findings, the managing director is concerned that financial administration procedures have not been appropriately considered in the disaster recovery plan. The managing director has accordingly asked you to make recommendations to improve internal financial controls that would be operating during a disaster. To assist him in his assessment of the significance of the risks involved, he has also asked that you provide him with a financial analysis and comments on the financial consequences relevant to a disaster situation. You have held discussion with various officials of ABC Ltd. They have provided you with information on the recent disaster simulation and their understanding of the financial implications of a real-life disaster, your notes from these discussions are set out in the attachment to this question. FACULTY OF COMMERCE, MANAGEMENT AND LAW Page 17 of 20 You are required to: Write a letter to the managing director, in which you discuss the following: a) The potential weaknesses, and your recommendations for improvements, in internal financial controls relevant to disaster; (20) b) The potential financial risks and implications thereof facing ABC Ltd in the event of a disaster; (5) c) Your recommendations for improvements to the disaster recovery plan of ABC Ltd in respect of the financial accounting systems