Wonderville Shire Council Assessment - Case Study Example

Part A 1. Wonderville Shire Council needs to ensure that they evaluate the internal audit department because it helps to fill up the various loopholes that might remain in the system. Bing able to evaluate the internal audit department helps to provide internal control which acts as a tool to measure the performance and at the same time reduce the chances of frauds and misappropriation of funds. It is important to have an internal audit department because of the following Firstly, having an internal control to evaluate the internal audit department ensures that the department is able to promote orderly, economical and efficient process which will help to gain productivity in operations. Organizations that are able to evaluate the internal audit department thereby ensures a check which helps to evaluate the performance against set standards and take steps which will help to improve the overall efficiency so that the internal audit provides beneficial results. Secondly, having an internal control to evaluate the audit department ensures that the misuse of funds and chances of committing errors gets reduced. Wonderville Shire Council by looking towards having an internal control so that the manner in which the audit department is working can be evaluated (Desai, Roberts & Srivastava, 2005). This will help to find the errors and fix it at the appropriate time so that the performance of the audit department can be measured and a check can be ensured that will prohibit the department from misusing their position and power. Thirdly, internal control for the audit department will help to check whether the audit department adheres according to the law and rules prescribed by the directives. This will help to check the method which will ensure that Wonderville Shire Council is able to abide to the regulatory framework (Desai, Roberts & Srivastava, 2005). This will thereby act as a tool to ensure that Wonderville Shire Council works according to the prescribed rules and any deviations can be brought to the notice so that steps can be taken at the right time Fourthly, this will ensure that the audit department is able to maintain and present the data in the most reliable form. This will help to ensure consistency in the performance of the audit department and will help to highlight the discrepancies and areas that Wonderville Shire Council needs to work on. This will thereby help to bring the required changes in the manner the Council looks to present the things and having an appropriate mechanism will help to ensure maximum benefit for the organization. Lastly, Wonderville Shire Council by having an internal control which looks towards evaluating the internal audit department will be ale to indentify the manner in which the audit department is working and any discrepancies or frauds or mistakes can be brought to the notice of the management so that appropraite steps can be taken at the correct time which will limit the loss or chances of spoiling the name of the organization. Wonderville Shire Council thus, by evaluating the performance of the internal audit department will be able to verify the performance and help the organization in developing a mechanism which will help them in achieving better results towards the growth of the organization. 2. While making external audit it is important that the external auditors are used so that the audit procedure verified by the internal audit department can be verified. ASA 610 also states that having an external auditor who audits the work on the internal audit department helps to ensure relevancy and checks the performance so that all misappropriations can be found out. Having an external auditor along with an internal one increases the role of external auditor as it is the responsibility of the external auditor to ensure that his final audited statement is correct and will be held responsible for any wrong misdoings of the internal audit department as it is his role to ensure that the work on the internal audit department is verified (ASA, 2009). This makes it important that Wonderville Shire Council has an external audit along with the internal audit so that the external audit can determine and validate the work of the internal audit which will thereby ensure a mechanism through which the performance is measured. Having an external audit for Wonderville Shire Council will help the organization according to ASA 610 as it will help the external audit to determine whether the work of the internal audit has importance and can be used for future performances (ASA, 2009). This will also act as a mechanism that will make the internal audit work efficiently as the fear that their performance will be evaluated based on different parameters will make them work efficiently and create fewer mistakes. The external audit through this mechanism will be able to gauge the competence of the internal audit and help in gauging the performance of the internal audit with reference to professional care (ASA, 2006). This will thereby make the internal audit work as a professional body and will look towards ensuring that there is effective communication so that the actual performance of Wonderville Shire Council is reflected (ASA, 2006). This will thereby help to improve the performance and validity of the audit department and will reduce the chances of committing error. Having an external audit will help to monitor the performance of internal control as it will make the internal audit department circumspect of the fact that their performance will be evaluated which will ensure that they work according to the set professional code of conduct and carry out their responsibility carefully (ASA, 2009). This will also help to ensure that the financial and operating performance is evaluated on a regular basis which will help Wonderville Shire Council to find out the errors and get them fixed at the appropriate time (ASA, 2009). This will thereby enhance the performance of the audit department and will help to ensure better performance. Wonderville Shire Council through this mechanism will also be able to ensure that they comply with the laws and regulations that have been prescribed by the law and will ensure that the final documentation and presentation matches the one provided by law (ASA, 2006). Wonderville Shire Council will thus be able to ensure that the external audit benefits the organization in different ways and helps to check and measure the performance of the internal audit department which will thereby ensure that the organization is better able to coordination ensuring proper result for the organization. 3. The risk identified for Wonderville Shire Council makes it important that the organization is able to use different audit procedures so that the risk can be managed properly. The following are the two audit procedures that can be used Firstly, is the risk based internal auditing where the internal audit and the process is used to ascertain the risk that the business faces and the mechanism that has been used to manage those. In this process the system of internal control looks towards checking the risk that the business faces and reduces to it an extent that is acceptable by the management thereby allowing them to pursue with the objective and work in the specified way (Griffiths, 2006). This is shows in the diagram below The above chart shows that Wonderville Shire Council by using this process will be able to measure the amount of risk and take steps to ensure that the risk is controlled to the maximum possible extent. The above chart shows that a control is inserted through the internal control method which helps to check the risk and pass on the risk that the management feels that the business will be able to deal with thereby ensuring effective control of risk and ensuring that the business is able to achieve its objectives. This mechanism will also help Wonderville Shire Council to ensure that risks which are over controlled are identified. This will help the organization to reduce control over those risks as it limits the performance and doesn’t allow the business to concentrate on other important aspects that will help the management in ensuring that they are able to perform efficiently (Griffiths, 2006). This the risk based internal auditing is a process which will help Wonderville Shire Council to control the risk that the business is facing and will be able to perform efficiently in achieving their objectives. Secondly, Wonderville Shire Council can look towards implementing both horizontal and vertical audit to identify the risk and take steps to control in. Through this mechanism Wonderville Shire Council will be evaluate each function and department both length and breadth to identify the different risk. This will help Wonderville Shire Council to take the required steps to reduce those risks so that the business is able to perform in a better way and deal with the contingencies in a better way (RMS, 2006). This strategy will help Wonderville Shire Council to concentrate on areas and deal with the risk identified by them in a better coordinated manner. This will thereby look the following Since, this strategy looks towards evaluating every bit of the organization so Wonderville Shire Council will be in a better position to ensure that they are able to ensure that risk is controlled. This strategy will help Wonderville Shire Council to ensure that the actual point of the risk that has been identified is looked into which will thereby help to develop a mechanism that will ensure reduction of risk. Thus, Wonderville Shire Council by using the above two strategy will be able to reduce the identified risk and be able to deal with the changes and contingencies in a better way. 4. The internal team audit department which looks after the tender and buying process should be looked by Peter Farland. The main reason for this is that the tender and buying process has encountered numerous frauds and errors which have resulted in widespread loss to the business. Peter Farland is well known accountant who has an experience of 15 years and has a good reputation with the organization. Peter will stand as a good position for this role because the management hears the voice of the charter accountant and works on the recommendation provided by him. This will help the tender and buying process as Peter will be able to identify the areas that have caused such a mistake and will also help to provide solution to it. Further, his experience will come handy as he will be able to deal with the difficult situations that might arise. Also, the fact that Peter is a chartered accountant and has complete knowledge regarding the rules and regulation he will be in a position to ensure that he is able to deal with the matter in a better way. His widespread experience will ensure that Peter is able to influence the working and change the manner it was conducted so that the organization benefits. Peter will also be able to ensure that the organization is able to deliver on the promises and will be able to deal with the matter in the legal frame. The overall situation demands a person who is experienced and has wide spread knowledge regarding the changing business environment. Peter with all his experience and knowledge fits well for the job. The management also favors him which will ensure that Peter will find it easy to bring the actual loop holes to the knowledge of the management which will thereby help to intensify the manner in which he is dealing with things thereby ensuring that Wonderville Shire Council is able to improve the working of the tender and buying process thereby ensuring efficiency in their working. Part B a. The Control is an IT application control because the IT application software provides some basic facilities and options so that the user of the new accounting system is able to use it efficiently. The accounting software looks to ensure that the application control doesn’t allow the user to manipulate the names of customers and once entered cannot be altered thereby ensuring safety and consistency while using the software. b. This is a basic IT general control as all IT software ensures that once the details pertaining to a customer or party is entered it cannot be altered. The IT software ensures that basic information like address, payment terms discount rates, selling prices and other basic information is not altered so that the use of the software ensures no changes in the basic information. This ensures safety and limits the chances of misusing the information so that there is safety in the usage of software (Moroney, 2011). c. This is a manual control because the user of accounting software has to ensure that that the postings are reconciled correctly in the general ledger as any mistake on the part of the accountant will be reflected. Since, this is not an automatically generated statement so it is important that the accountant controls the system efficiently and ensure that the manual control doesn’t have any leakages. Also, the statement has to be generated by the accountant and doesn’t ensures the use of package to generate it automatically thereby it is a manual control system (Moroney, 2011). d. This is an IT application control because the IT software doesn’t allow the user of the accounting software to post entries if the customer a greater limit than stated. Since, this process is automatically generated by the IT application software and despite several attempts by the user the transaction cannot be posted shows that IT application control. Further, the process is different for all IT application control and all IT application software doesn’t allow the same thereby it is more directed towards a particular IT software which thereby ensures that the control is IT application (Moroney, 2011) e. This is an IT application control because the software doesn’t allow the user to post incomplete transaction. The IT software has been designed in such a way which limits the person from saving incomplete transactions thereby ensuring that the IT application software controls the functions (Moroney, 2011). f. This is an IT general control because all IT application programs restrict the user to entre negative value for quantity and price. The IT software are developed in a manner which will ensure that the user is unable to enter negative values and it is true for all IT application program. This thereby ensures that the IT is a general control which has its relevance over all accounting software. g. This is an IT application control because the IT software automatically posts the entries on 28-30 June as the warehouse remains closed. This is a process which is generated automatically and is not true for all IT application but for specific IT applications. Since, this process works here and generates an automatic statement to ensure it the control is an IT application control which is true for specific software (Moroney, 2011). h. This is a general IT control because all IT application software ensures that the data entered into the system is automatically posted overnight so that the user can use it the next day. Since, this process is true for all IT application program and all IT software ensures that the data is posted the next day thereby it is an IT general control. All IT application programs are designed and made in a way which allows the postings to be done overnight so that the user are able to retrieve the information and use it the next day. This thereby makes the process true for all IT application thereby making it a general IT control (Moroney, 2011). i. This is a manual control because the user of the IT application software has to ensure that the information is concealed and changed regularly to avoid the misuse of information. Since, the process is controlled by the operator and user of the accounting system and it is their duty to ensure that the information is changed from time to time on an individual basis this makes the process a manual control and increases the role and relevance of individuals (Moroney, 2011). j. This is a manual control as the user has to obtain the necessary information from the help desk and get the required training which will facilitate the use of the software. Since, this is a process which is done by the user of the IT application software and it is their duty to ensure that they are able to learn the required technology and method and the process is directly controlled by the user this thereby makes the process to be controlled manually. This process also increases the role of the user and ensures that process lays entirely on the hand of the user thereby making the process to be manually controlled (Moroney, 2011). References ASA. (2006). ASA 610 Considering the Work of Internal Audit. Auditing & Assurance Standards Board. Austrialian Government, Australia ASA. (2009). ASA 610 Using the Work of Internal Audit. Auditing & Assurance Standards Board. Austrialian Government, Australia Desai, V., Roberts, R. & Srivastava, R. (2005). A Conceptual Model for External Ausditor Evaluation of the Internal Audit Function Using Belief Function, Deakin University, Australia Griffiths, D. (2006). Risk Based Internal Auditing: Three Views on Implementation. Standards Australia. Moroney, C. (2011). Auditing A Practical Approach: .Wiley Publication RMS. (2006). Internal Quality Audits: What they are and how to carry them out. Institite of Chartred Accountants in Australia, Australia Read More