Required: c. Explain four (4) matters that the Office of the Auditor General should consider in deciding the extent of the use of the work of the internal auditors of the Council. d. Due to the current state of the Internal Audit department of the Council, the Minister responsible for Local Government believes that outsourcing its functions instead of maintaining an IA department would yield better results and save on overhead. The lead consultant of your firm asked you to identify and explain three (3) advantages and two (2) disadvantages of outsourcing the internal audit function. Provide an alternative that may be consider ensuring greater efficiency of the internal audit function. Give two (2) advantage and (2) disadvantage that this alternative may provide.
The Office of the Auditor General is mandated to conduct audits of all public institutions in
Jamaica. It has been observed that the same observations and recommendations are made
each year in the Auditor General’s Reports concerning increased misuse and misapplication
of public funds.
Following the establishment of new parish councils in some parishes around the country
four years ago, there is concern that the trend of misuse and misapplication of public funds
may be experienced in these newly established councils just like is the case with the
existing councils. The Ministry responsible for local government has decided that
consultants should be engaged to hold workshops with the controlling officers of the newly
established councils on the importance of transparency and accountability in the use of
public funds and the importance of internal
firm that has been engaged to run these workshops and all the new districts around the
country. The lead consultant in your firm has asked you to prepare the materials that you
will use in these workshops.
You have been provided with the following information about one of the old parish
councils. The main source of funds for this Council are the grants received from the central
government. In addition, the council collects different levies from local businesses
operating in the parish.
The Council maintains financial records and prepares financial statements annually which
are subject to audit by the Office of the Auditor General. The Council has an internal audit
department which conducts financial audits. Due to understaffing, and inexperienced staff,
the financial statements for the previous three years have not been audited by the internal
auditors.
The Council received a grant of US$12 million for the construction of ten community
centers, one each in the ten communities under the control of the Council. This is part of a
grant from a donor received by the Ministry. The Council as a sub recipient signed an
agreement committing to adhere to the grant conditions. The maximum amount that was
supposed to be spent on each center is US$1.2 million but the average cost of each of five
finished/constructed centers amounted to US$1.8 million, totaling US$9 million. The
balance of US$3 million from the grant was spent on paying salaries to Council employees
who were in arrears.
The following information was established concerning the centers constructed:
1. Only three of the centers met the design specifications and were going to be
commissioned for use. The works on the other two centers were substandard.
2. The award of the contract to build the centers was not done through competitive bidding
contrary to the grant conditions and agreement. Award was through single sourcing and
the basis for doing so was that the contractor selected was going to be cheaper because he
is based within the district and needed no mobilization funds.
A review of the previous working papers of the last audit of this Council revealed that the
risk of material misstatement was assessed to be high. During the audit it was established
that the controls over large volumes of inventory were poor and that there has been no
inventory count at the year-end for many years.
Required:
c. Explain four (4) matters that the Office of the Auditor General should consider in
deciding the extent of the use of the work of the internal auditors of the Council.
d. Due to the current state of the Internal Audit department of the Council, the Minister
responsible for Local Government believes that outsourcing its functions instead of
maintaining an IA department would yield better results and save on overhead. The lead
consultant of your firm asked you to identify and explain three (3) advantages and two (2)
disadvantages of outsourcing the internal audit function. Provide an alternative that may
be consider ensuring greater efficiency of the internal audit function. Give two (2)
advantage and (2) disadvantage that this alternative may provide.
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