Section c: Internal Audit. A Chicago area Governmental Agency has an Internal Audit Department. The Director of Internal Audit (Audit Pro) makes it very clear he believes his boss is the Agencys Chief Executive Officer (Mr. Big). Audit Pro runs the Internal Audit Department as though it is an Asset Recovery Unit to the exclusion of virtually everything else (i.e., it only seeks to recover duplicate payments or identify unbilled revenue items). Before joining the Internal Audit Department, Audit Pro never worked in auditing he was employed as the supervisor of Accounts Payable at a related Governmental Agency.

A fraud is uncovered due to the actions of a whistle-blower. Mr. Big initiated fraudulent documents to the payroll department and thereby received $500,000 in additional vacation pay he was not entitled to. Mr. Big committed suicide minutes before the Board of Directors was going to fire him for fraud and theft.

Required: Section c: Internal Audit. Answer the following two questions:

1. What was wrong with the set up and operation of the Internal Audit Department, including Audit Pros role?