5/26/2021 myModules : AUI3703-21-ALL : Online Assessment

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Online Assessment

Question Pool: AUI3703 ASSIGNMENT 3 Supersemester

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Question 1: Short Answer/Essay - 25.0 points

Question 1 (25 marks)

The Audit and Risk Committee of Department of Transport has mandated the internal audit activity to perform a
preliminary investigation to determine whether there are any fraudulent activities in the Student Transport
Programme funds.

After a week of preliminary investigation, you had an informal progress meeting with the Manager: Internal Audit. He
informs you that inadequate internal controls have not only given rise to the flooding of illegal operators but has also
led to unnecessary fatalities on the road. In addition, there are several complaints from school principals regarding
students arriving late at school, either because they were walking or due to vehicle break-downs. According to one
of the principals, one morning a minibus arrived carrying 33 students in a 21-seater minibus.

Furthermore, management does not require monthly reports on the Student Transport Programme. As a result, the
responsible manager, Mr. Ruan Sabie does not show interest in addressing falsified claims by service providers on
safety issues. Mr. Sabie only works with one staff member to assist in the division and does not show interest in
recruiting additional staff members. Despite service providers being paid hundreds of thousands rands per month,
there are false travel claims submitted for routes and pickup points that are not in the approved route list.

The Risk Manager sent the auditors a picture received through anonymous reporting of students being transported
in heavily overloaded and unsafe vehicles. The auditors struggled to obtain a number of documents such as, tender
documents, contracts and roadworthiness certificates of vehicles to determine the validity of the claims paid.

An audio clip of a service provider, Mr. Pare, was also shared through the hotline. In the audio Mr. Pare was heard
stating that he only had one bus instead of eight (8) vehicles as indicated in the tender documents. The auditors
then checked the bus registration details and it transpired that Mr. Ruan Sabie was the owner instead of Mr. Pare.

The Finance Manager stated that he has been Mr. Sabie’s neighbour for the past 10 years and noticed a drastic
lifestyle change in Mr. Sabie in the past year. He demolished his house and built a double storey house, bought his
wife a VW Touareg and his kids have moved from the public school to a private school. Last weekend, a bus parked
next to Mr. Sabie house the whole weekend and he recognised the registration number from one of the claims he
recently paid.

REQUIRED MARKS

1.1 Identify eight (8) red flags that can be observed from the scenario. (8)

1.2 Recommend eight (8) controls that should be in place to avoid similar fraud from (8)
taking place.

1.3 Identify the type of fraud from the definitions below: (5)

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a. Fraud committed by a respected person or a professional person who enjoys

high social status in the exercise of his or her profession.

b. Cases where individual employees (in collusion or alone) defraud their

employers, such as misappropriating assets. It is committed with the intention
to benefit the individual(s) at the detriment of the employer.

c. Any attempt made to conceal the act of misappropriation, for example by

offering false explanations or falsifying documents. It can be committed
against individuals or organisations.

d. When a person, to whom the responsibility for certain assets belonging to

another party has been entrusted, uses such assets or allows them to be
used in any way that conflicts with the interests or instructions of the owner of
the assets, usually with malicious or deceptive intent. It can be committed
against individuals or organisations.

e. It is the form of fraud in which computer programs and computer-stored data

are manipulated to gain unlawful access to funds and other resources is
known as computer fraud.

1.4 Describe the responsibilities of internal audit in fraud investigation. (4)

Question 2: Short Answer/Essay - 25.0 points

Question 2 (25 marks)

Clear View, a radiology practice in Pretoria has 15 branches at hospitals and doctor’s practices in the area, some of
which are only 3 kilometres apart. All bookings are managed separately by each individual practice. At each
practice, patients have to complete the relevant forms in the admission department, go for their relevant tests at the
consultation rooms and then return to the admission department for payment.

The services provided by Clear View include:

X-rays
Mammograms
MRI scans
CAT and PET scans.
MRI scans

You investigated the number of patients that were seen daily at three different locations that are within 6 kilometres
from each other.

Capacity/ JKR Hospital LCM Hospital ZAF Hospital

Day

Day Mon Tue Wed Mon Tue Wed Mon Tue Wed

Mammograms 15 22 15 23 14 16 10 10 10 10

MRI scans 15 12 10 5 10 12 10 5 2 3

CAT and PET 10 11 9 11 8 10 10 6 5 7

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scans

To keep the machines operational, each machine is required to undergo a daily maintenance routine, but this is not
usually performed since there are too many patients waiting. Last month the PET scan machine was down for 4
days at JKR Hospital because of lack of maintenance and the patients were not being able to get the scans in
hospital. Complains from patients were received on long waiting time at the admissions department for processing
of their forms and payment of the consultations.

The machines that are used for the tests, are imported and extremely expensive at over R5 million each. Clear
View’s management would like to ensure that the use of the machines is maximised before committing to new
purchases.

REQUIRED Marks

2.1 Define efficiency, effectiveness and economy in the context of a performance audit. (6)

2.2 Formulate five (5) questions to put to the manager of the practice in order to obtain (5)
information about the efficient functioning of the processes at Clear View.

2.3 Formulate six (6) audit procedures that could be used to determine the efficient (9)
utilisation of resources in the processes at Clear View. Include the procedures that you
performed to obtain the information about the number of patients seen per day.

2.4 Match the following statements to the correct element of an audit finding: (5)

a. Regular daily maintenance on the machine has not been carried out due to high
demand.
b. Business worth R52 000 was lost during the 4 days that the machine was not
operating.
c. The PET scan machine was down for repairs for 4 days.
d. Encourage non-urgent, out of hospital users to make an appointment with the
under-utilized machine at ZAF Hospital just down the road.
e. Install a centralised booking function for appointments that will allow the patient to
get the earliest appointment near their location.

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