REVISION QUESTION BANK ~ AUDIT AND ASSURANCE (Int) (F8) Answer 18 CLEANCO Risks ‘Tests of control (@) Human Resources ‘There is a risk that staff without proper experience or training are All staff should be required to fil in proper application forms The auditor should employed (and might cause | and submit references with take a representative damage to client property). them. References should be sample of staff from the checked for all new staff payroll and inspect the employed. To the extent relevant application forms permitted by law, staff should to ensure that they have be asked to provide details of bbeen properly completed. criminal convictions. All staff References should also be particularly those without inspected, experience, should receive proper training, Inappropriate staff, such as Systems for allocating staffto | m fora sample of high risk those with criminal convictions, | assignments should ensure that clients, ensure that only pethaps, might be employed in| only appropriate stafT are appropriately classified high security environments. allocated to high tisk clients — staff have been utilised by means of a staff classification system, Staff might misappropriate There should be documentary | ml take a sample of entries in ‘company or client property. controls aver the movement of the documentation showing cleaning materials and reviews movements of materials of the usage of cleaning and ensure that appropriate materials, entries in systems have been made. The company should ask clients | m review the overall usage of regularly about the levels of cleaning materials and satisfaction with the service investigate any unusual provided (and have variations. investigation and disciplinary procedures in place where review the result of client allegations of misappropriation satisfaction surveys and are made), establish if appropriate ‘management responses hhave been made. There is a risk that staffare paid | All normal payroll controls such | fora representative sample for hours not worked, or that incorrect payroll deductions are made. as the use of timesheets, reconciliations and regular reviews of payroll costs should be in place. Personne! controls should ensure that new staff ean only be entered onto the payroll system with appropriate authorisation from an independent official, of entries in the payroll, re- perform calculations to censure that they are made correctly, ensure that appropriate authorisation hhas been made and review the overall level of payroll cost, investigating variations. EO wrnmssconar 1045AUDIT AND ASSURANCE (Int) (8) - REVISION QUI ‘STION BANK A high tumover of staff increases all of the risks noted above. Staff should receive feedback on their performance and be rewarded for good performance and long service. inspect the documentary evidence of staff reviews, review and assess the processes by which good performance and long service are rewarded, and for a sample of staff with good reviews and/or long service records, determine whether rewards have been forthcoming. (b) Procurement ‘There is a risk of fictitious or ‘excessive payment to suppliers (Gc. fraudulent payments). There isa risk of inaccurate, delayed or incorrect payments, Authorisation controls should censure that an appropriate, independent official authorises the acceptance of new suppliers onto the system and that only authorised suppliers ean be used. Authorisation checks on invoices should ensure that only goods that have been received are paid for and that agreed prices are being paid, ‘The auditor should: = review a representative sample of suppliers on the system and inspect written evidence of authorisation for them, = analytically review the level of payments for, and utilisation of, goods on a periodic basis and investigate any significant variations. There isa risk that the company does not abstain the best value for money by using existing suppliers. Controls over the purchase ledger such as reconciliations with a purchase ledger control account and the matching of documents should be in place to censure that discounts are obtained for timely payment and that good relations with suppliers are maintained, There should be regular, documented negotiations with existing suppliers and discussions with alternative suppliets to ensure that value for money is being obtained. review a representative sample of invoices, credit notes and other documentation (hard copy or electron) for evidence of matching to appropriate goods received documentation and price lists = review and eritically assess the documentation and rogularity of negotiations and discussions. 1046 QD wvREVISION QUESTION BANK ~ AUDIT AND ASSURANCE (Int) (F8) (© Marketing ‘The third party advertiser may be in breach of advertising The contract between Cleanco and the advertising company ‘The auditor should: “ 1 review the contrat withthe “eats sive isn accordance company, and the Thetype ofageressive direst | Sithreputionsandany bot | Slt materi o tail adverxing may actially | prt guidance (Cleanco ensure hat ii Gamage the epuiation of | wishes ota thigh Cenco whish might esti | reputation). Tere should be Tegultins and any best dccreaseinmarkctshar | cuss inthe contact equing | FReee guidance The the company to indernity d Cleanco against any costs appropriate legal advice arising fom ssh reaches was taken wih regard 0 Cleanco shuld take egal indemniisandother advice on the wording of such pC clauses, contract 3 tain doemmeniary The hid pry should be evidence show thatthe Advertsing material to Cleaneo | averting material has for approval, and Cleanco yeen approved at an should have final control over appropriate level within the design and content of the Cleanco, advertising materi. a paiew badges nd There isa risk of extensive ‘marketing expenditure not resulting in new business. There should be proper budgeting for advertising costs, and a regular review of such costs by comparison with new business obtained, Cost controls should ensure that discounts offered are not so great as to make contracts “unprofitable, after marketing costs have been taken into account, ‘management accounts to ensure that advertising costs have been controlled and are resulting in an appropriate level of increased business at appropriate prices. NB: There are several other issues that might be dealt with in the answer to this quesion, for example risks, controls and tests relating to health and safety procedures. EO wrnmssconar 1047