KOLEJ PROFESIONAL MARA

AUDITING ASSIGNMENT (20%)

(ACC 3573)
SESSION 3 2022/2023
SET 4

PROBLEM STATEMENT
Internal control is an integral part of an organization’s governance system for its ability to
manage and mitigate risk. Risk must be monitored by the governing body and management
to avoid personnel or third-party taking advantage of the opportunities to commit fraud and
embezzlement. Internal control main purpose is to counter the threats to achieving the
organization’s objectives. It is a crucial aspect of an organization’s governance system and
ability to manage risk, is fundamental to supporting the achievement of an organization’s
objectives and creating, enhancing, and protecting stakeholder’s value.

Hence, it should be used to support the organization in achieving its objectives by managing
its risks, while complying with rules, regulations, and organizational policies. The
organization should therefore make internal control part of risk management and integrate
both in its overall governance system. The organization should determine the various roles
and responsibilities with respect to internal control, including the role of governing body, all
level of management, employees, and internal and external assurance providers, as well as
coordinating the collaboration among participants.

Auditors should obtain knowledge about client and understanding its information processing
by performing different tests of control. Auditor should understand and be familiar with
accounting terminologies, transaction cycles, payroll cycles and acquisition processes.
Finally, auditors should obtain a sufficient understanding of the entity’s monitoring methods
relating to financial reporting to understand how those procedures are used to initiate actions
to address inadequate performance.

To fulfill the monitoring and evaluation on the internal control of the company, your
audit team has been instructed to perform the assessment on internal control during
the interim audit based on the case study given. Before the final audit, your team are
required to present the report to the audit manager to enable him/her to prepare the
audit planning on the extent of audit procedures. Your audit team should comprise 4-
5 (max) members.
CASE STUDY:

A Chartered Accountant audit working papers include the narrative description below of the
cash receipts and billing portions of the internal control of Melati Medical Centre Sdn.Bhd.
The company is a small health care provider. It employs seven salaried physicians, 10
nurses, three support staff in a common laboratory, and three clerical workers. The clerical
workers perform such tasks as reception, correspondence, cash receipts, billing, and
appointment scheduling and are adequately bonded. They are referred to in the narrative as
“office manager”, “clerk 1”, and “clerk 2”. Most patients pay for services by cash or cheque at
the time services are rendered. Credit is not approved by the clerical staff. The physician
who is to perform the respective services approves credit based on an interview. When
credit is approved, the physician files a memo with the billing clerk (clerk 2) to set up the
receivable from data generated by the physician. The servicing physician prepares a charge
slip that is given to clerk 1 for pricing and preparation of the patient’s bill. Clerk 1 transmits a
copy of the bill to clerk 2 for preparation of the revenue summary and for posting in the
accounts receivable subsidiary ledger. The cash receipts functions are performed by clerk 1,
who receives cash and cheque directly from patients and gives each patient a pre-numbered
cash receipt. Clerk 1 opens the mail and immediately stamps all cheque “for deposit only”
and lists cash and cheque for deposit. The cash and cheque are deposited daily by the
office manager. The list of cash and cheques together with the related remittance advices
are forwarded by clerk 1 to clerk 2. Clerk 1 also serves as receptionist and performs general
correspondence duties.

Clerk 2 prepares and sends monthly statements to patients with unpaid balance. Clerk 2
also prepares cash receipts journal and is responsible for the accounts receivable subsidiary
ledger. No other clerical employee is permitted access to the accounts receivable subsidiary
ledger. Uncollectible accounts are written off by clerk 2 only after the physician who
performed the respective services believes the accounts to be uncollectible and
communicates the write-off approval to the office manager. The office manager then issues
a write-off memo that clerks 2 processes. The office manager supervises the clerks, issues
write-off memos, schedules appointments for the doctors, makes bank deposits, reconciles
bank statements, and performs general correspondence duties.

Your team are required to analyze the case study, perform the group meeting, prepare
and submit the report.

Below are details that must be included in your reports:

1. Introduction of internal control system (ICS) and its components.

2. Explain internal control in an information technology (IT) environment.
3. Describe the effect of computer information system (CIS) on ICS which relates to
business entities.
4. Create internal control questionnaire (ICQ) or internal control evaluation
questionnaire (ICEQ) for any four (4) areas. (* control activity area is compulsory)
based on the case study given. Minimum of 20 questions.
5. Prepare the flowchart of a company as to document your understanding of ICS.
6. Analyse the implementation of ICS of the company by:
a) Identifying the control objectives, control activities and performed test of control.
b) Identify material weaknesses, state the possible implication/effect and suggest
for improvement/recommendation by issuing the Management Letter.
7. Conclusion
8. Appendixes and references.
9. Plagiarism report (70:30 similarities)
 INSTRUCTIONS FOR REPORT WRITING (15%) AND VIDEO GROUP MEETING
(5%)

(1) REPORT WRITING: Must be submitted latest by 3 Feb 2023 (Week 9)

Rubric for REPORT WRITING (15%)

NO ITEMS ASSESSED SCORE (Marks) MARKS

1 Cover page and acknowledgment 2

2 Table of contents 1
3 Introduction of ICS and CIS 4

4 Describe the effect of CIS on ICS 4

5 ICQ/ICEQ 4
5 Flowchart of a company 4

6 Control Objectives, Control Activities and test of 8

control (Minimum three each)

8 Weaknesses, Implications and recommendations 20

(Management Letter) [Maximum three each +
format of Management Letter]
9 Conclusion 5
10 Appendixes & references 8

WEIGHTAGE (60/60 marks) x 15% 15%

(2) Video Group Meeting (Recorded meeting for 15 minutes) – must be

submitted by 3 Feb 2023 (week 9).

Rubric for Video Group Meeting (as attached) (5%)

4.00-3.01 3.00-2.01 2.00-1.10 1.00-0 Score
Speaking Clear articulation, Clear articulation Some Speaking is
Skills voice volume, tone; but not as polished. mumbling; little inaudible or too
steady speaking rate; Either an eye contact; loud and needs to
good posture, eye inconsistent volume uneven rate; include clear
contact, enthusiasm, or speaking rate. little or no articulation. In
and confidence 2)Some expression. addition, there
enhance the mispronounced 2)Needs to have must be eye
presentation. words. clear contact, a
2)Displays mastery of articulation and consistent speaking
the English language. a steady rate, and an
speaking rate. enthusiastic tone.
Visual Aids The presentation The presentation The The presentation
includes two additional includes at least presentation needs to include
tools (e.g., slides, one additional tool includes one one or two
prop, or graphic) that (e.g. prop, or additional tool additional tools to
help explain the graphic) that helps (e.g., slides) help explain the
content, seek explain the content that helps content and engage
feedback, and engage and engage the explain the the learner.
the learner. learner. content.

Technical 1) Audio and video are At least ONE of the 1) Audio and 1) Audio needs to
Production of high quality. following criteria video are be enhanced and
Technical disruptions needs to be fixed: inconsistent in clear in sound
do not impact the flow 1) Audio and video clarity (too quality. clarity in
of the meeting. are of high quality. loud/too sound.
2) The meeting Technical soft/garbled) at 2) Video needs a
background (in video disruptions do not times, and non-distracting
frame) is not impact the flow of negatively background and
distracting. the meeting. impacts the flow good lighting of the
3) Lighting is balanced 2) The meeting of the meeting. subject and shared
and allows the student background is not 2) The meeting screen.
to clearly see the distracting. background is
others. 3) Lighting is somewhat
balanced and distracting.
allows the student 3) Lighting is
to clearly see the too dark or too
others. light.

Teamwork 1)Chairperson and Presence of at least Present of at No clear indications

secretary clearly a chairperson AND least a of roles in the
indicated. a secretary. chairperson OR group.
2)Every individual has 2)More than half of a secretary. 2)Inappropriate
a role. the members are 2)Half of the attires that do not
3)All dressed dressed members are reflect the group.
appropriately. appropriately. dressed
appropriately.

Enthusiasm Everyone was Playful attitudes Level of Vulgar words and

motivated and showed that slightly seriousness was distracting
great determination in affected the inappropriate. behaviours were
meeting. meeting’s flow and shown.
level of
seriousness.
Score (x/20)x 5%