The audit department of Global Energy Inc has been asked to review the process surrounding employee travel & related expenses (T&E). This growing company has automated and changed some aspects of the travel and reimbursement process recently. Last year's budget for T&E expenses was set at $43 million, but actual expenses were much higher, as detailed below. T&E expenses include transportation (air, car rental, cab, etc), lodging, meals, entertainment and miscellaneous expenses incurred by employees outside the normal purchasing process. Here's the following situation and facts: 1. For frequent travellers (over night trips), the company will provide a credit card (CC) with a credit limit of $5,000 for use only on business travel and related expenses; no personal purchases are allowed. A credit crad request form is completed by the traveller and approved by cost center (CC) Mgr and forwarded to Accounting for processing. The credit card will be in the name of the employee (ie employee is responsible for paying off all balances at the end of each month, which is due by the 15th of each following month). However, the company can be held liable in case of non-payment. Accounting will send notice to traveller, cost center (CC) Mgr. & Controller of balances past due of 30 days or more. The company has implemented an online airline reservation system that provides real-time routing options and prices. Travellers can access this system, using their employee id & password, to view the various options and book their airline reservations. All booked air travel are charged to the traveller's credit card. Last year airline expenses totaled $22 million (budget was $19 million). 3. The Purchasing Dept had negotiated a corporate agreement last year with Avis for rental cars and Marriott for hotels with preferred rates. If Avis or Marriott properties are not available at travel locale, employees are allowed to choose other suppliers. 4. Accounting has developed an Excel template file that includes days of the week, place of travel, business purpose and categories for each expense item (air, hotel, meals, etc). The T & E reports can be filed on a weekly basis. The traveller will attach the receipts (required for any individual item >$20) to a hard copy of the T & E template report and forward to Accounting for review and reimbursement. 5. An annual budget, including T&E items, are established at the beginning of the fiscal year, and the Budget Dept provides monthly spending analysis to each CC Mgr. For last fiscal year, actual lodging expenses totaled $12 million (budget = $10M), car rental/cab totaled $6 million (budget = $5M), meals totaled $5 million (budget = $4M), and entertainment totaled $3 million (budget =$2M), and miscellaneous travel expenses totaled $6 million (budget =$3M). The company has continued to enjoy moderate increase in total revenues but net income has started to decrease slightly, but still within industry averages. The CAE has asked the Auditor-in-Charge (AIC), which is you, to assess the T & E process and identify the following; A) Risks not adequately mitigated with needed controls; B) Existing controls that needs to be tested by IA to ensure effective implementation, and C) Possible areas requiring further audit investigations or suggestions to improve the process. A. Missing Controls: Use the following template to identify any risks not adequately controlled as described above (if process steps are not specified, assume there are no specific procedures in place). Include at least 3 additional risk statements and identify recommended control(s) for each risk: Area/activity Example: Company travel Credit Card Risk Control statement Owner(s) Credit card(s) Accounting missing or Mgr unaccounted for Recommended Comments or controls Assumptions Segregate issuance of CC duties from tracking CC balances. B. Current controls (based on above situational facts) that needs to tested by IA during the audit. (If needed, please include any assumptions you've made to the current process or practices) Area activi Risk statement Control procedures Control Owner Comments or Assumptions Credit cards Airline reservation Processing expense report Travel budget (other area?) C. Besides the above steps, what additional review/analysis, if any, would you preform to help identify possible improvements to the T & E process or ways to help idenfity waste or abuse? Please include your reasoning. The audit department of Global Energy Inc has been asked to review the process surrounding employee travel & related expenses (T&E). This growing company has automated and changed some aspects of the travel and reimbursement process recently. Last year's budget for T&E expenses was set at $43 million, but actual expenses were much higher, as detailed below. T&E expenses include transportation (air, car rental, cab, etc), lodging, meals, entertainment and miscellaneous expenses incurred by employees outside the normal purchasing process. Here's the following situation and facts: 1. For frequent travellers (over night trips), the company will provide a credit card (CC) with a credit limit of $5,000 for use only on business travel and related expenses; no personal purchases are allowed. A credit crad request form is completed by the traveller and approved by cost center (CC) Mgr and forwarded to Accounting for processing. The credit card will be in the name of the employee (ie employee is responsible for paying off all balances at the end of each month, which is due by the 15th of each following month). However, the company can be held liable in case of non-payment. Accounting will send notice to traveller, cost center (CC) Mgr. & Controller of balances past due of 30 days or more. The company has implemented an online airline reservation system that provides real-time routing options and prices. Travellers can access this system, using their employee id & password, to view the various options and book their airline reservations. All booked air travel are charged to the traveller's credit card. Last year airline expenses totaled $22 million (budget was $19 million). 3. The Purchasing Dept had negotiated a corporate agreement last year with Avis for rental cars and Marriott for hotels with preferred rates. If Avis or Marriott properties are not available at travel locale, employees are allowed to choose other suppliers. 4. Accounting has developed an Excel template file that includes days of the week, place of travel, business purpose and categories for each expense item (air, hotel, meals, etc). The T & E reports can be filed on a weekly basis. The traveller will attach the receipts (required for any individual item >$20) to a hard copy of the T & E template report and forward to Accounting for review and reimbursement. 5. An annual budget, including T&E items, are established at the beginning of the fiscal year, and the Budget Dept provides monthly spending analysis to each CC Mgr. For last fiscal year, actual lodging expenses totaled $12 million (budget = $10M), car rental/cab totaled $6 million (budget = $5M), meals totaled $5 million (budget = $4M), and entertainment totaled $3 million (budget =$2M), and miscellaneous travel expenses totaled $6 million (budget =$3M). The company has continued to enjoy moderate increase in total revenues but net income has started to decrease slightly, but still within industry averages. The CAE has asked the Auditor-in-Charge (AIC), which is you, to assess the T & E process and identify the following; A) Risks not adequately mitigated with needed controls; B) Existing controls that needs to be tested by IA to ensure effective implementation, and C) Possible areas requiring further audit investigations or suggestions to improve the process. A. Missing Controls: Use the following template to identify any risks not adequately controlled as described above (if process steps are not specified, assume there are no specific procedures in place). Include at least 3 additional risk statements and identify recommended control(s) for each risk: Area/activity Example: Company travel Credit Card Risk Control statement Owner(s) Credit card(s) Accounting missing or Mgr unaccounted for Recommended Comments or controls Assumptions Segregate issuance of CC duties from tracking CC balances. B. Current controls (based on above situational facts) that needs to tested by IA during the audit. (If needed, please include any assumptions you've made to the current process or practices) Area activi Risk statement Control procedures Control Owner Comments or Assumptions Credit cards Airline reservation Processing expense report Travel budget (other area?) C. Besides the above steps, what additional review/analysis, if any, would you preform to help identify possible improvements to the T & E process or ways to help idenfity waste or abuse? Please include your reasoning