You are an internal auditor manager. An inexperienced internal audit trainee has been allocated to your team to assist you with planning the internal audit engagement for cash sales at the campus cafeteria.

The owner of the cafeteria, Mr Smartie, informed you and the trainee that he is very concerned about a significant decrease in sales during the past two months. He observed a 40% decline in revenue figures as compared to the same two (2) month period during the previous year.

As part of step four (4) of the planning stage of the internal audit, the following operational risk has been identified: Cash received is not recorded.

Reportable internal audit observations emerge by a process of comparing "what should be" with "what is".

YOU ARE REQUIRED TO:

i.) Formulate an engagement objective for this internal audit engagement (as part of stepfive (5) of the planning phase of the internal audit) specifically focusing on the risk hereabove.(1)

ii.) Formulate a narrow engagement scope for this internal audit engagement (as part of stepfive (5) of the planning phase of the internal audit) specifically focusing on the risk hereabove.(1)

iii.) Improve the following audit engagement procedures (which were written by theinexperienced internal audit trainee as part of step seven (7) of the planning phase of theinternal audit engagement) by replacing each one of the inaccurate verbs in brackets withan appropriate verb. It is not necessary to re-type the entire sentence. Only provide thecorrect verb.

a.)(Observe) the amount on the sales invoice to test the accuracy thereof.(1)

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b.) (Verify) the bank statement with the cash receipts and cash payment journalentries.(1)c.) (Count) the past two months' cash sales to those of the corresponding two months' ofthe previous year.(1)d.) (Review) segregation of duties between the cashier and the accountant.(1)

iv.) What is the proper terminology for "what should be" and "what is" respectively?(1)

v.) Provide a full description for what "what should be" means/entails in terms of an internalaudit engagement.(1)

vi.) In determining "what should be" during the planning phase of this internal audit engagement,which one of the following (a. - d.) would be the least desirable (worst) criterion againstwhich to judge current operations?(1)a.)Best practices for the cash sales function in comparable industries.b.)The cafeteria's official policies and procedures regarding delegation of authority andassigning ofresponsibilities.c.)Performance standards established by senior management of the cafeteria.d.)The operations of the cash sales function as documented during the last audit.

vii.) Explain why you selected the specific option in vi.) here above.(1)