This is related to essential guide to internal auditing, pickett T_T

Correct the errors.

TASK ONE

Refer to Data Appendix B and review the draft Transport Audit report in conjunction with extracts from the current audit working paper file, indicate areas that you wish to bring to Andys attention at the review meeting. Please refer to all Data Appendices. The review should at minimum cover the reports logic, consistency, grammar, structure, impact, balance, discrepancies, usefulness to client, value, evidence to support findings and overall professionalism.

EXECUTIVE SUMMARY

1. The investigation was carried out as part of the 200x/200y plan agreed by the Audit Committee. It was conducted by Andy Stone during May 200x in line with systems audit methodology. The terms of reference for the audit are at Appendix B.

2. My report examines the extent to which performance targets and monitoring systems are able to control the utilisation of the transport fleet managed at the Leeds Depot. It is a high level review of the overall framework and as such, the recommendations indicate areas where management can develop further measures to ensure 100% efficiency of transport utilisation.

3. The audit involved interviews with a number of senior managers and staff in Leeds, Manchester and at one of the three factories (Telford) as well as the examination of a wide range of forensic documentation.

4. We would like to thank Sally, drivers and staff who supported us in the conduct of this review, although we were disappointed with the negative attitude of some staff at the Depot.

5. The performance of vehicles used to transport drink stocks between the factories, warehouses and retail outlets is based on several key measures. The targets are agreed annually by the Management Board (MB) each year and performance is monitored on a monthly basis by Mike Tram who in turn reports progress to the Board.

6. Leeds Depot has a well defined role that supports the overall aims and objectives of Mellow Drinks Ltd. The transport performance measures are broken down into smaller bits that are formally documented in the Leeds Depot strategic plans.

7. We feel that there are many strong features of the performance management system as it currently operates. Particular strengths are the monthly reporting and review of overall performance.

8. We are, however, of the opinion that the range and nature used is not always capable of giving a complete picture of utilisation of the Leeds transport fleet. In particular, the things used to measure the rest breaks of drivers provide only limited information and are, in practice, fly-by-night.

9. We also found several errors in vehicle utilisation times that resulted from poor record keeping at the Depot. This increases the menace of unreliable performance reports. We take a dim view of drivers who cannot be bothered to complete simple returns.
10. The audit requirements are designed to strengthen the performance measures and information to support the better utilisation of the fleet now and in the future. We trust these requirements will not be rejected by management, as has happened in the past.

11. Requirement 1. Comprehensive and Detailed performance indicators and targets should be developed to measure the performance of non fleet vehicles that are based in Leeds. (For example, mini-vans and pool cars.) (Paragraph 22).

12. Requirement 2. A further range of performance indicators should be developed to measure driver rest periods and total drive time in any 24 hour period. The tachometers should be used to support this report, in conjunction with a more reliable vehicle log that makes clear the rest periods. This log should then be checked by the Depot Manager each month and disciplinary action taken where errors are found. (Paragraph 26).

13. Requirement 3. A more accurate procedure should be employed for recording vehicle journeys and drivers reminded of the importance of good record keeping. Risk assessment workshops could help reinforce the importance of good procedures (Paragraph 28-29).

14. Requirement 4. The Depot Manager should make covert spot checks on the vehicle movement and reconcile this information to support records. (Paragraph 28-29).

FINDINGS & RECOMMENDATIONS

Operational Planning

15. The Leeds Depot provides a transport service between the various locations in Mellow Drinks Ltd and has an annual budget of 2.5m, with over 500 vehicles and deliveries including daily trips to Manchester, Leeds, Regional sites and retail outlets although the contemporary operational plan for April 200x to March 200y was finalised last year to ensure that all delivery targets are met.

16. The performance of the Depot is set against its key objectives which consist of:

1. Meeting all delivery targets.

2. Keeping within the set financial budget.

3. Complying with all legal provisions.

4. Maintaining the right number of trained divers.

5. Meeting the vehicle utilisation targets.

17. Unfortunately, these objectives have not been communicated to staff in induction programmes and staff meetings.

18. Each year specific performance targets are reset by the Management Board (MB). Progress against these targets is reported monthly to the MB and the overall achievement of targets is published in the annual operating report.

19. We found that a cascade process was used to set supporting targets at Depot level, including those relating to vehicle utilisation.

20. Overall we assume that this is a watertight basis for managing the fleet at the Leeds Depot.

Utilisation Performance Indicators

21. The published targets for meeting the vehicle utilisation objective (see Para 17.v above) consist of:

1. miles per vehicle

2. cost per vehicle

3. number of trips per vehicle

4. average weekly downtime

22. Having just three key targets allows a focus on basic outputs. However, whilst meeting MB requirements, the performance indicators used do not provide a rounded picture of vehicle performance.

23. Non fleet vehicles such as the pool cars and mini-vans cost a lot but have never been subject to utilisation reports. This means they are not well managed at all in terms of utilisation and efficiency.

24. The need to use other measures of performance is addressed below. However, in designing further performance measures a balance needs to be struck between the need for simplicity and ease of use and the need to give a rounded picture of economy, efficiency and effectiveness.

25. Recommendation 1. A range of simple performance indicators and targets should be developed to measure objectively the performance of non fleet vehicles that are based in Leeds. (For example, mini-vans and pool cars.)

Driver Rest Periods

26. There is a statutory requirement for commercial drivers to take rest periods on a regular basis to avoid tiredness and fatal accidents. This requirement could be done through careful scheduling and monitoring the times that each driver spends on the road. Breach of the regulation can have serious spin offs and can result in fines and criminal charges against an organisation. Moreover, our motor insurance policies may become void if any breach of driver rest periods occurs. This could well lead to other negligent acts such a drunk driving.

27. The current procedure for tracking driver rest periods is derisory. Each driver makes a weekly return and this is entered into a computerised information system by Depot office staff . There is no check made on these returns and it is not reconciled to the recording devices (Tachometers) that are installed in each vehicle to record vehicle movement details. In fact over 75% of a sample of drivers returns when compared to vehicle movement records maintained by the Depot Clerk contained differences of over an hour. The drivers fill out the forms from their manual trips log whenever they had time, sometimes many weeks later.

28. Recommendation 2. A further range of performance indicators should be developed to measure driver rest periods and total drive time in any 24 hour period. The tachometers should be used to support this report, in conjunction with a more reliable vehicle log that makes clear the rest periods. This log should then be checked by the Depot Manager each month and disciplinary action taken where errors are found.

Record Keeping

29. The various performance measures for vehicle utilisation is dependent on the accuracy of information that feeds into the process. Measures are standards that are compared to actuals and only work if the actuals are derived from reliable information. We found that staff at the Leeds Depot were negligent in preparing and processing the information that feeds into the performance measurement system. We found that:

i. Office staff had no idea about processing information on vehicle arrivals, departures and maintenance.

ii. Drivers did not bother to fill in their vehicle logs in a timely fashion. The depot drivers confirmed that most of the information is a matter of sheer guesswork.

iii. The computerised transport system contained substantial incomplete and duplicated data. This wasascertained through an interrogation of the current database. The errors were due to inadequacies in the records fabricated by the drivers and transport officers.

iv. Depot management failed to communicate the need for accurate vehicle records to new and existing Depot staff and drivers.

v. Only one driver, Mandy Preston, showed any real interest in getting the returns right.

30. The Depot Manager admitted that vehicle records are poor.

31. Recommendation 3.A more accurate procedure should be employed for recording vehicle journeys and drivers reminded of the importance of good record keeping. Risk assessment workshops could help reinforce the importance of good procedures.

32. Recommendation 4. The Depot Manager should make covert spot checks on vehicle movement and reconcile this information to support records to uncover any problems with records of journey details.

Annex A

TRANSPORT AUDIT

VEHICLE UTILISATION

TERMS OF REFERENCE

1. To appraise the adequacy and effectiveness of internal control for the Leeds Depot performance measurement system for vehicle utilisation.

2. To report and make recommendations as appropriate.

3. Scope to include:

• targets for vehicle utilisation.

• compliance with the rules on driver rest period.

1. The audit review will involve interviews with staff at the Depot, Head Office, Factory and Regions and the examination of relevant documents.

5. The results will be reported to the Chief Internal Auditor, Depot Manager and Director of Operations.

THE SITUATION The simulation is set within a large dinks manufacturing and disribution company with a head office in Manchester, three factories and Regional warehouses and a transport function. The Candidate is an audit manager in a large audit team headed by the Chief Intemal Auditor, Regina Varney. Lead Auditor, Andy Lamont, reports to an Audit Manager, Frank Stoppard, and has just finished a two-week audit of the transport function based in Leeds. This was a difficult audit as the pre vious audit, two years ago, resulted in several contentious issues regarding the level of supervision by the operations manager which audit felt was inadequate and concerns over a vehicle maintenance contract Frank Stoppard was able to attend th client but due to an urgent matter at Head Office has only been able to keep in touch with Andy over the phone. The audit is quite straightforward but is seen as a fairly high-risk area in terms of strategic business success Andy has around eighteen months experience in internal audit although this is the first time he has done an audit alone, from start to finish. Andy finished the field work last Friday but could not see the client (who was on holiday) to discuss the findings. Andy has prepared a draft report and booked a meeting with the client ater on in the week - 25h May 200x) where the findings will be discussed, after which the draft report will be formally released for comments. Frank St few days of the audit and the Candidate has been asked by the CIA to take over responsibility for reviewing Andy's draft report (meeting with Andy planned 24 May 200x) in Frank's absence. It is now Monday 21 May 200x and the candidate will have to: e opening meeting with the oppard went on long term sick-leave during the last Review the draft audit report. Consider the various working papers from the current audit file (extracts only) Prepare for the meeting with Andy to eview the re port. Prepare for the meeting with the client (involving the Operations Manager, Depot Manger, Andy and the Candidate) . Respond to various e-mails and file notes that come the Candidate's attention during the day Deal with matters that impact on the audit manual and documentation standards generally as they arise. There are many tasks to complete, and much documentation to consider to ensure that the audit report meets acceptable professional standards. THE SITUATION The simulation is set within a large dinks manufacturing and disribution company with a head office in Manchester, three factories and Regional warehouses and a transport function. The Candidate is an audit manager in a large audit team headed by the Chief Intemal Auditor, Regina Varney. Lead Auditor, Andy Lamont, reports to an Audit Manager, Frank Stoppard, and has just finished a two-week audit of the transport function based in Leeds. This was a difficult audit as the pre vious audit, two years ago, resulted in several contentious issues regarding the level of supervision by the operations manager which audit felt was inadequate and concerns over a vehicle maintenance contract Frank Stoppard was able to attend th client but due to an urgent matter at Head Office has only been able to keep in touch with Andy over the phone. The audit is quite straightforward but is seen as a fairly high-risk area in terms of strategic business success Andy has around eighteen months experience in internal audit although this is the first time he has done an audit alone, from start to finish. Andy finished the field work last Friday but could not see the client (who was on holiday) to discuss the findings. Andy has prepared a draft report and booked a meeting with the client ater on in the week - 25h May 200x) where the findings will be discussed, after which the draft report will be formally released for comments. Frank St few days of the audit and the Candidate has been asked by the CIA to take over responsibility for reviewing Andy's draft report (meeting with Andy planned 24 May 200x) in Frank's absence. It is now Monday 21 May 200x and the candidate will have to: e opening meeting with the oppard went on long term sick-leave during the last Review the draft audit report. Consider the various working papers from the current audit file (extracts only) Prepare for the meeting with Andy to eview the re port. Prepare for the meeting with the client (involving the Operations Manager, Depot Manger, Andy and the Candidate) . Respond to various e-mails and file notes that come the Candidate's attention during the day Deal with matters that impact on the audit manual and documentation standards generally as they arise. There are many tasks to complete, and much documentation to consider to ensure that the audit report meets acceptable professional standards