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Case 1

The document provides answers to 4 questions regarding an internal audit finding of excessive employee turnover at a company called Bes Corporation. For question 1, the response recommends raising high turnover as an internal control deficiency to management during fieldwork. For question 2, recommendations include recalibrating labor practices like hiring more employees, improving benefits, and ensuring fair compensation to boost morale. For question 3, objectivity is a concern since internal audit reports to controllership rather than an independent audit committee. For question 4, internal audit's location under controllership is inappropriate and it would be better to have an independent audit committee reporting directly to governance.

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Brian Go
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338 views

Case 1

The document provides answers to 4 questions regarding an internal audit finding of excessive employee turnover at a company called Bes Corporation. For question 1, the response recommends raising high turnover as an internal control deficiency to management during fieldwork. For question 2, recommendations include recalibrating labor practices like hiring more employees, improving benefits, and ensuring fair compensation to boost morale. For question 3, objectivity is a concern since internal audit reports to controllership rather than an independent audit committee. For question 4, internal audit's location under controllership is inappropriate and it would be better to have an independent audit committee reporting directly to governance.

Uploaded by

Brian Go
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Hi, I'd love to help you with your questions above.

Rest assured that I will try to the best of


my ability to provide answers that are meaningful and adds value. Hope I get to help you.
Good luck with your studies!
Step-by-step explanation
Answers:
 
Question 1: What are the procedures to be done in terms of the fieldwork stage of an
internal auditor as a response to an audit finding number 1 (excessive turnover)?
Answer: The best response to be done by an auditor during audit fieldwork given the
audit finding on excessive turnover of employees is to raise such concern
immediately as an internal control deficiency primarily related to operations rather
than financial reporting to the management or to those charged with governance in
the company being audited. We have to make the management or those charged with
governance understand the negative impacts of a high turnover rate. Ultimately it
could result in low employee morale. Its immediate consequences could be extreme
because it could make employees lose confidence within the organization. As a
result, it is highly probable that there would be a loss of valuable knowledge and
experience that cannot be easily replaced. 
 
Question 2: What are your possible recommendations as an internal auditor as a response
to an audit finding number 1 (excessive turnover)?
Answer: Putting myself in the place of the auditor, the recommendation that I would
suggest in response to the audit findings on excessive turnover is for the
management or those charged with governance to recalibrate their existing labor
practices. Essentially, one major reason I see why there is an excessive employee
turnover is because of overworked and unsatisfied employees who have had
increased workloads and responsibilities due to a lack of an active or trained
workforce. My suggestions would be: 1) to hire more employees and train them so
that the workload would be redistributed and not heavily incline on few employees, 2)
recalibrate their vacation leave/ sick leave benefits to make it more enticing for the
employees to stay, 3) do a shifting schedule to lessen the heavy workload, 4) provide
these employees with perks and benefits to acknowledging the value they provide in
the company. By acknowledging their contribution, we boost employee morale and 5)
ensure that these employees are well-compensated and proper checking of overtime
work is in place. Of course, their overtime work must be fairly compensated.
 
Question 3: Based on the audit findings above, are there any objectivity problems with Bes
Corporation? Explain. Furthermore, if you happen to answer "yes", provide also
recommendations on how to minimize/eliminate any objectivity problems. If you happen to
answer no, after your explanation, just indicate "recommendations not applicable"
Answer: Yes, I see objectivity concern. First and foremost, the internal audit
department is not entirely independent from the controllership function. This should
not be the case. I recommend that a separate body called an audit committee be
established within the organization. This will be totally independent from the
controllership and should be directly reporting to those charged with governance.
Doing so, would minimize if not totally eliminate bias in the audit reports and audit
findings they submit. They should act for the benefits of the public interest and not
pursue management objectives which would be conflicting to their role. 
 
Question 4: What if the internal audit department is part of the corporation's controllership
function, and copies of the internal audit reports are sent to the board of directors, evaluate
the appropriateness of the location of the internal audit department within Bes'
organizational structure.
Answer: The internal audit department of the  corporation seems to be not
appropriate in relation to where it stands in the organization. Internal audit
department serves as the watch dog and in a way checks and balances of the
controllership function. They should be independent and they should be objective
whenever they are assessing financial reporting concerns or internal control
deficiencies. As such, I think it is better to have an audit committee instead that is
directly reporting to those charged with governance and not under the umbrella of
the controllership function. They should not allow bias, conflict of interest or undue
influence override professional or business judgments.
 
Hi, those are all my responses. Hoping I helped you. You've got this!!! :)

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