provide feedback on a range of issues that have been identified in the review of key business processes. You have been asked to report on specific issues in each areas of the organisation in line with the findings below. Your Internal Audit Manager has requested that you produce two (2) separate Audit Review reports as follows: 1. Report for PURCHASING FUNCTION AUDIT 2. Report for PAYROLL FUNCTION AUDIT, CASH AUDIT and IT AUDIT

The Internal Audit manager of SBG Travel wants you to provide feedback on a range of issues that have been identified
in the review of key business processes. You have been asked to report on specific issues in each areas of the
organisation in line with the findings below.
Your Internal Audit Manager has requested that you produce two (2) separate Audit Review reports as follows:
1. Report for PURCHASING FUNCTION AUDIT
2. Report for PAYROLL FUNCTION AUDIT, CASH AUDIT and IT AUDIT
When documenting your reports, your manager wants you to use the Internal Controls format (Appendix A) to detail
and document the required modifications to procedures to facilitate compliance with internal control procedures. This
is a standardised format to promote consistency of implementation.
Each of your reports must be distributed to your manager (assessor) by the end of Week 10. Submit both reports in
CANVAS so that your manager can review and provide feedback. Ensure you review your work and check for errors
beforehand.

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STUDENT – PRODUCT ASSESSMENT TASK
Task Number 2 of 2 Task Name Practice Firm Internal
Controls
National unit/s code FNSACC516 National unit/s title Implement and Maintain
Internal Control
Procedures
National qualification code FNS50217 National qualification title Diploma of Accounting
RMIT Program code C5390 RMIT Course code ACCT5429C
Section A – Assessment Information
Duration and/or due date: This assessment is due at the end of Week 12, Sunday 11:59pm.
Task Instructions
Summary and Purpose of Assessment
This is assessment task two (2) of two (2) that you are required to complete for this course. You must satisfactorily
complete both assessments to be deemed competent for this course.
The purpose of this assessment is to have students participate in a range of tasks that are typical of an internal auditor.
As part of this, students will review a range of internal operations and provide recommendations to ensure
organisational compliance with corporate governance principles, ethical requirements and related legislation.
Assessment Instructions
What
There are three parts to this internal audit assignment based on SBG Travel:
• Part A – Individual Report
You are required to create two (2) reports based on the audit findings for SBG Travel in different areas of internal
control.
• Part B – Group Work
You will work in small groups of 2 – 4 to develop implementation schedules for 2 areas of internal control for SBG
Travel.
• Part C – Scenario
You will be required to assess the progress of an area of internal control following the implementation and evaluate
and report on progress.
Further instructions for Parts A, B and C are provided below.
SBG Travel
As a new employee of SBG Travel, it has been decided to assign you to the newly created Internal Audit Department to
give you experience in better understanding the processes and controls within the Company. This is a job rotation
which will be managed by the Internal Audit Manager.
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Over the next few years, the SBG Travel Board of Directors wish to develop the company into an industry leader. The
operating activities, sales and finance functions are being continuously reviewed, like all efficient businesses. This is
particularly required in an increasingly competitive industry, affected by technology. The internal audit function has
been operating for a short time and the results of its audit have been positive and well received.
Part A – Individual Reports
The Internal Audit manager of SBG Travel wants you to provide feedback on a range of issues that have been identified
in the review of key business processes. You have been asked to report on specific issues in each areas of the
organisation in line with the findings below.
Your Internal Audit Manager has requested that you produce two (2) separate Audit Review reports as follows:
1. Report for PURCHASING FUNCTION AUDIT
2. Report for PAYROLL FUNCTION AUDIT, CASH AUDIT and IT AUDIT
When documenting your reports, your manager wants you to use the Internal Controls format (Appendix A) to detail
and document the required modifications to procedures to facilitate compliance with internal control procedures. This
is a standardised format to promote consistency of implementation.
Each of your reports must be distributed to your manager (assessor) by the end of Week 10. Submit both reports in
CANVAS so that your manager can review and provide feedback. Ensure you review your work and check for errors
beforehand.
Audit Issues that have been identified:
1. PURCHASING FUNCTION AUDIT
The purchasing department of SBG Travel consists of the following:
• A Purchasing manager reporting to the Managing Director
• A Purchasing officer reporting to the Purchasing manager
• An administrative support supervisor, who reports to the purchasing officer
• Two administrative support officers, reporting to the administrative support supervisor
Following the operational audit of the central Purchasing function, 800 purchase orders were reviewed and the
following weaknesses were found:
• 51 orders were not signed by a purchasing officer
• 15 were not authorised by the correct purchasing officer for that product
• 12 purchases of goods or services were made with verbal requests from branch travel agent manager
and purchase orders were not raised for them
• 35 orders have been outstanding for more than 3 months.
• 8 additional orders have been raised duplicating orders for good included in those orders outstanding
for more than three months
• 5 orders were for goods for the personal use of staff but consequently and correctly charged to them
• 2 order sets were missing.
In addition to the above, the organisation structure of the Purchasing function was reviewed and found to be
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ineffective in being able to comply with the basic tenets of internal control.
Tasks required:
a. Describe the procedure used in the operational audit that may have discovered each of the above errors of
procedure or control.
b. In report, you need to include details of the following:
I. The identification of the error(s) found
II. An analysis outlining the possible consequences of the error from both a corporate governance and
ethical requirements perspective
III. Review the financial delegations and accountabilities of the current Purchasing Organisation and
document the risks found.
IV. Develop and document modifications to guidelines/procedures for staff to facilitate organisational
compliance with internal control procedures and corporate governance principles.
V. Document a modified Purchasing Organisation Chart with any additional details and duties that
maybe needed, including correct financial delegations and accountabilities to ensure consistency and
compliance with the internal control procedures, corporate governance and ethical requirements,
appropriate financial legislation and industry-standard practices.
2. PAYROLL FUNCTION AUDIT
The SBG Travel payroll function uses MYOB and has the following characteristics:
• Managing Director authorises new and changed individual employment offers.
• HR Advisor updates the Employee Masterfile for new employees, terminations and changes to pay rate
and banking details. Paperwork supporting the changes is filed in the personnel files, with a copy
provided to payroll.
• Payroll clerk enters:
✓ timesheet and leave forms
✓ Calculates termination pay
✓ Runs the payroll
✓ Prepares a package for the Chief Accountant containing:
Payroll report
Audit report of changes to the Employee Masterfile and supporting
paperwork provided by HR
✓ Copies of all leave forms and termination calculations
✓ A report comparing the variance between last fortnight’s payroll
and this fortnight’s payroll
• Chief Accountant:
✓ checks and approves the payroll package
✓ creates the EFT payment upload
✓ presents the payment upload to the Managing Director for approval
Tasks required:
a. Document the potential weaknesses in these internal controls over payroll accuracy and prevention of
fraud in line with current financial legislation.
b. Make a recommendation that will prevent or detect future instances of the error. In developing the
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enhanced internal control procedures ensure that they apply to Corporate Governance requirements for
the business’s internal operations (in this case the payroll system). Use information from your handout to
seek and clarify information from at least two (2) other appropriate authoritative sources (e.g. ATO) to
inform the recommendations. All sources used, the reason why they were contacted for clarification
purposes and the actual information sourced must be supplied as an appendix to this assessment.
3. CASH AUDIT
SBG Travel electronically invoices all customers rather than collecting cash when services are provided.
Julie Law, who is an accountant, opens all the inward mail on a daily basis. She does this in order to respond
quickly to customers’ needs and any other queries or problems they may have.
When she opens the mail, all correspondence is handed over to the Office Manager but all cash remittances
are listed by her immediately.
She deposits all cash listed promptly. Then she uses the listing to prepare the cash receipts journal (in MYOB)
and to update the Accounts Receivable.
Julie Law’s duties also include approving credit, authorising any allowances and writing off bad debt. The
Accounting Manager is very happy with her work.
Following a recent audit it was discovered that Julie Law has committed major theft of the company’s cash
collections. She did not record some sales, and authorised fictitious credits to customers
Tasks required:
a. Identify the key Internal Control weaknesses in the Cash system of the business.
b. Develop and document modifications to guidelines/procedures for staff to facilitate organisational
compliance with internal control procedures. Note all sources of information accessed and used.
4. IT AUDIT
The SBG Travel Internal Audit Department have reviewed the IT function to assist in establishing new efficiencies.
After an extensive review of the IT management procedures, the auditor discovers the following:
When reviewing the company’s IT organisation for financial delegation and accountabilities, the Audit Department
listed the following duties:
Systems Analysts:
• Supervise programming staff.
• Design client applications or select third party software.
• Check operation of applications while running.
• Determine any necessary maintenance or efficiency adjustments and corrections to program
applications and make such program changes as necessary.
• Train Computer Operators in program applications they have designed.
• Prepare User Operations Manual for applications they have designed.
Programmers:
• Code program applications to specifications designed by system analysts.
• Assist System Analysts in documenting application procedures.
• Prepare test data for testing program.
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• Operate computer when testing programs or when computer operators are absent due to illness or
annual leave or during end of month second shifts.
Librarian:
• Ensure computer operating system is maintained to latest version from software supplier.
• Maintain register of all client application programs.
• Maintain register of all utility programs.
• Secure all programs not in use in a cupboard in the computer room.
• Create backup copies of all data and programs once a month and store in the “Library” cupboard in
the computer room.
Other IT General security procedures were also noted as follows:
i. Each member of the staff signed a daily log book when they arrived and left for the day. Many
staff members signed for both arrival and departure on arrival or during the day when their
workload allowed them.
ii. Visitors were issued with a visitor’s badge at the entrance to the IT area and allowed them to
then enter to see the relevant member of staff.
iii. Security doors to the IT department and the computer room were usually left open.
iv. Fire alarms were functioning but fire extinguishers were not carrying valid test tags.
v. The company had regular tours of their computer room by schools in the vicinity.
vi. The computer hardware supplier had recently moved their head office operations to another
state. Their new head office had the only other mainframe computer of their brand that was
large enough to be used as an emergency backup.
Tasks required:
a) Review the current roles of the IT organisational staff and identify any conflicting roles and responsibilities,
explain why these are internal control weaknesses and recommend who should do these roles and why.
b) For each of the IT General Security issues, review and develop procedures to identify the internal control
issues, the risks to the business and develop appropriate modifications to ensure organisational compliance
that will prevent or detect future instances of the error.
Part B: Group Work
Note: To complete this part, the assessor will organise you to break off into small groups of 2-3 to develop
implementation schedules for 2 areas of internal control for SBG Travel.
Task Required:
1. During Week 11, the manager (assessor) wants to meet with the students, the Operational Purchasing
Manager and Accounting Manager (key audit stakeholders). Schedule and attend the meeting. To ensure
agreed timeframes are met, at the start of the meeting, distribute their report containing recommendations
to both parties.
2. Discuss and review the key internal control weaknesses and then recommend effective operating procedures
they are putting forward to be implemented to ensure organisational compliance. Summarise the key
outcomes from the meeting including questions asked.
3. From the discussion, students will need to agree upon and document appropriate timetables to implement
their recommendations for two (2) of the areas they reported on (in Part A). Both timetables should run for up
to 6 months (maximum) and outline the key methods, work practices and routines to be used.
4. Submit both timetables with comments into Canvas for final review with the Internal Audit Manager.
Part C: Scenario
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It is now 6 months after you met with the operational Purchasing Manager to discuss the report of the findings of the
internal control weaknesses and the recommendations that were advised to him to implement. Following the meeting,
it was agreed that he would implement all the recommendations as per the timetables that you have provided.
The Audit team have now completed a follow-up Audit on Purchasing and have given a summary of the key Internal
Control performance indicators and the number of process reporting errors found for each:
Purchasing Internal Control Performance Indicators Audit Results:
Internal Control Objective Number of errors Population Sampled Summary Of Error
1. Completeness 5 800 No evidence of the
Purchase Order being
cancelled
2. Accuracy 2 800 Purchase Order did not
match to purchase
requisition on quantity
and price
3. Validity 1 800 Supplier details do not
match to the master
supplier list
4. Accountability 10 800 Purchase requisition
were not approved by
department head
Tasks required:
You have been asked to:
1. Review the Performance Indicators to report on their compliance with the Corporate Governance/Internal
Control procedures they recommended 6 months ago.
2. Identify and evaluate the variations following the adoption and implementation of the Corporate Governance
Requirements/Internal Control procedure recommendations made 6 months ago. As part of the evaluation,
determine the causes of the variations detailed, specifying whether it relates to specific organisational
structural issues, record-keeping practices etc.
3. Comment and write a report on any changes to and/or resulting compliance with financial legislation (where
applicable) stating how the new operating procedures comply with corporate governance requirements,
organisational policy, and financial delegations and accountabilities (refer to the handout for guidance).
Explain how this should be maintained moving forward to ensure ongoing consistency and compliance.
4. Students are to document their evaluation findings and submit it to the Audit Manager via Canvas at the end
of week 12.
Where
You will be provided some class time to work on this assessment, however, it is expected that the majority of this
assessment will be completed outside of class.
How
You will be assessed against the criteria listed in the marking guide in Section B of this task. To achieve a satisfactory
result, you will need to address all criteria satisfactorily.
Conditions for assessment
• This is an individual assessment. You must not copy the work of others. You must submit their own work written in
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their own words.
• You must submit all parts of the assessments by the due date outlined above
• You will be assessed as satisfactory or not satisfactory based on the marking guide outlined in Section B
• Please make arrangements with your assessor at least one week prior to the assessment due date if you feel you
require special allowance or allowable adjustment to this task.
• For the other circumstances and types of assessments students need to apply for Special Consideration. More
information is available on https://www.rmit.edu.au/students/student-essentials/assessment-andexams/assessment/special-consideration webpage.
• Please ensure your full and correct name is written on the student version of this assessment task (do not use
nicknames or abbreviations).
• You can appeal the assessment decision according to the RMIT Assessment Processes
Instructions on submitting your project/portfolio/report
You are required to submit all parts of the assessments via Canvas by the given due date outlined above.
Equipment/resources students must supply: Equipment/resources to be provided by RMIT or the
workplace:
• Computer/Laptop with WiFi access
• Business software (Word &Excel) available free to
students from the RMIT Website
• WiFi access to CANVAS and researching the Internet
• Onsite computer with WiFi access for presentations
• Data projector for presentations
Section B – Marking Guide
TASK:
Describe the product to be
assessed
students will review a range of internal operations and provide recommendations to
ensure organisational compliance with corporate governance principles, ethical
requirements and related legislation.
Marking Guide for Part A
Criteria for assessment
It is recommended that for product assessments
you divide your criteria into key sections and under
each section clearly describe the criteria students
must demonstrate
Satisfactory Not Satisfactory Marking Guide
Minimum requirements to be met:
Part A – Individual Reports
1. Purchasing Function Audit
a) Student has described the procedure
used in the operational audit that may
been used to discover each of the errors of
procedure or control.
☐ ☐
b) Student has written a report that
included the following details:
I. The identification of the
error(s) found
II. An analysis outlining the
possible consequences of the
error from both a corporate
☐ ☐
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Criteria for assessment
It is recommended that for product assessments
you divide your criteria into key sections and under
each section clearly describe the criteria students
must demonstrate
Satisfactory Not Satisfactory Marking Guide
Minimum requirements to be met:
governance and ethical
requirements perspective
III. Review the financial
delegations and
accountabilities of the current
Purchasing Organisation and
document the risks found.
IV. Develop and document
modifications to
guidelines/procedures for
staff to facilitate
organisational compliance
with internal control
procedures and corporate
governance principles.
V. Document a modified
Purchasing Organisation Chart
with any additional details
and duties that maybe
needed, including correct
financial delegations and
accountabilities to ensure
consistency and compliance
with the internal control
procedures, corporate
governance and ethical
requirements, appropriate
financial legislation and
industry-standard practices.
2. Payroll Function Audit
a) Student has documented the potential
weaknesses in the internal controls over
payroll accuracy and prevention of fraud in
line with current financial legislation.
☐ ☐
b) Student has:
• Made a recommendation that will
prevent or detect future instances
of error
• Ensured that the enhanced
internal control procedures being
developed apply to the Corporate
☐ ☐
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Criteria for assessment
It is recommended that for product assessments
you divide your criteria into key sections and under
each section clearly describe the criteria students
must demonstrate
Satisfactory Not Satisfactory Marking Guide
Minimum requirements to be met:
Governance requirements for
business’ payroll system
• Sought and clarified at least one
(1) other appropriate source to
inform recommendations made.
3. Cash Audit
a) Student has identified the key Internal
Control weaknesses in the cash system of
the business.
☐ ☐
b) Student has developed and documented
modifications to guidelines/ procedures for
staff to facilitate compliance with internal
control procedures.
☐ ☐
4. IT Audit
a) Student has:
• Reviewed the current roles of the
IT organisational staff and has
identified any conflicting roles and
responsibilities
• Explained why the above are
considered as internal control
weaknesses and recommended
who should be responsible for
those roles with justification.
☐ ☐
b) Student has for each of the IT General
Security issues identified:
• The internal control issues
• The risks to the business
Student has developed appropriate
modifications to ensure prevention or
detection for future instances of the error.
☐ ☐
Observation Checklist and Marking Guide for Part B – Group Work
List of actions to be observed Satisfactory Not Satisfactory Comments
Part B – Group Work (Oral Communication – Meeting)
Student has scheduled and attended the ☐ ☐
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List of actions to be observed Satisfactory Not Satisfactory Comments
meeting with the manager (assessor)
regarding the development of an
implementation schedule .
Student has distributed to the manager
(assessor) a report containing the
recommendations to both parties at the
start of the meeting.
☐ ☐
During the meeting, student has discussed
the key internal control weaknesses and
the recommended effective operation
procedure they are putting forward to be
implemented to ensure organisational
compliance.
☐ ☐
Part B – Group Work (Documentation after Meeting)
Criteria for assessment
It is recommended that for product assessments you
divide your criteria into key sections and under each
section clearly describe the criteria students must
demonstrate
Satisfactory Not Satisfactory Marking Guide
Minimum requirements to be met:
From the discussions, student has agreed
upon and documented appropriate
timetables to implemented their
recommendations for two (2) of the areas
they reported on in Part A.
☐ ☐
When creating the timetables student has:
• Ensured that both timetables run
up to 6 months (maximum)
• Outlined the key methods, work
practices and routines to be used
☐ ☐
Student has submitted both timetables
with comments into Canvas for final
reviewed with the Internal Audit manager
by the agreed deadline.
☐ ☐
Marking Guide for Part C
Criteria for assessment
It is recommended that for product assessments
you divide your criteria into key sections and under
each section clearly describe the criteria students
must demonstrate
Satisfactory Not Satisfactory Marking Guide
Minimum requirements to be met:
Part C – Scenario
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Criteria for assessment
It is recommended that for product assessments
you divide your criteria into key sections and under
each section clearly describe the criteria students
must demonstrate
Satisfactory Not Satisfactory Marking Guide
Minimum requirements to be met:
1. Student has reviewed the performance
indicators and reported on their
compliance with the Internal Procedures
they recommended 6 months ago.
☐ ☐
2. Student has identified and evaluated the
variations following the implementation of
the Internal Control procedure
recommended 6 months ago. Student has
ensured they have included as part of their
evaluation the following:
• Determined the causes of the
variations detailed
• Specified whether it relates to
specific organisational structural
issues, record-keeping practices
etc.
☐ ☐
3. Commented on any changes to and/ or
resulting compliance with financial
legislation, and stated how the new
operating procedures comply with
corporate governance requirements,
organisational policy, and financial
delegations and accountabilities.
☐ ☐
4. Student has documented their
evaluation findings and submitted it to the
Audit Manager via Canvas by the agreed
deadline.
☐ ☐
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Section C – Feedback to Student
Has the student successfully completed the task? Yes No
Feedback to student:
Assessor Name Date
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Appendix 1 – Internal Controls Format
Internal Control
Objective
Control Strategy Control Type Test of Controls
Example:
Completeness
• All sales to be
recorded
• Sequentially
pre-numbered
invoices
• Adequate
documents and
records
• Examine
documents