You are an Audit Manager in Alpha and Partners (AP), a rm of Chartered Certied Accountants in Malaysia. You are preparing for the year end audit of Petro Eerhad {Petro}, for the year ending 3'0 June EDIE. Petro has grown rapidly over the past few years, and is now one of your rm's most important clients. Petro has been an audit client for eight years and your firm has provided audit, taxation and management consultancy advice during this time. The client has been satisfied with the services provided, although the taxation fee for the period to 313 June 2013 remains unpaid. Audit personnel available for this year's audit are most of the staE from last year, including hair Peter, an audit partner and I'u'ir Iames, an audit senior. er Peter has been the audit partner since Petro became an audit client. You are aware that Annie Peter, the daughter of Mr Peter, has recently been appointed the nancial director at Petro. To celebrate her new appointment, Annie has suggested taking all of the audit staff out to an expensive restaurant prior to the start of the audit work for this year. 1Your rm has just been asked for assistance from Beta and Partners (RP), a rm of accountants in a bordering country. This country has just implemented the internationally recognised codes on corporate governance and HP has a number of clients where the codes are not being followed One example of this from Mietro Public Limited Company (NIetro), a listed company, is shown below. As Malaysia already has W corporate governance codes in place EP have asked for your advice regarding the changes necessary in Metro to achieve appropriate compliance with CDI'DDI'ETE EDVEI'C CDdE-'S . Extract from the financial statements of Metro regarding corporate governance. Mr Shawn is the Chief Executive Officer and board chairman of Metro. He appoints and maintains a board of five executive and two non-executive directors. While the board sets performance targets for the senior managers in the company, no formal targets or review of board policies is carried out. Board salaries are therefore set and paid by Mr Shawn based on his assessment of all the board members, including himself, and not their actual performance. Internal controls in the company are monitored by the senior accountant, although detailed review is assumed to be carried out by the external auditors; Metro does not have an internal audit department.(a) Describe any FIVE (5) corporate governance weaknesses faced by Metro and provide a recommendation to address each weakness to ensure compliance with corporate governance principles. (10 marks) (b) BP is also not very clear about the functions of an audit committee and internal audit department and also outsourcing of internal audit services. They have seek clarification from your firm on this matters too. Required: (i) Explain the functions of an internal audit department. (4 marks) (ii) Explain any FOUR (4) functions of audit committee. (4 marks) (iii) Explain what is meant by outsourcing of internal audit. (2 marks) (iv)Discuss any THREE (3) advantages and TWO (2) disadvantages of outsourcing an internal audit department. (5 marks) [Total : 25 Marks]
