Faculty of Business Repeat Assignment Title Sheet

Course and Stage:               BA (Hons) Accounting and Finance Stage 3


Study Mode: Full time Yes Part-time Yes
Assignment No.: Repeat Assignment    


Assignment Title:                Internal Control Assessment, , Auditor Independence & Objectivity



Word count: 1,500   Weighting 20%
Submit assignment to: Business Faculty Office (D103) & Turn It In on moodle

Learning outcomes assessed in this assignment


  1. Evaluate the nature, purpose and scope of an audit and the legal, regulatory and ethical framework for auditing


  1. Describe the nature of internal control systems of relevance to the audit, including IT systems


  1. Identify and apply the procedures required to evaluate control risk, including communication of the weaknesses, impacts and professional recommendations to those charged with governance and management


  1. Devise an overall audit strategy, identify and formulate the audit tests and evidence required to meet the objectives of audit assignments to comply with the International Standards on Auditing




Question 1 Part 1: Case Study


The ISAAC Construction Company (ICC) is involved in building large infrastructure items such as roads and bridges as well as government funded buildings such as hospitals and schools. Each individual infrastructure item or building is referred to by (ICC) as a contract. At any one time, ICC normally has between 5 and 8 different contracts in progress. Each contract can take between 3 and 36 months to complete. Labour for each contract is provided partly from ICC’s own employees and partly by using sub‐contracts; that is using employees from other companies on a short term basis. All non‐current assets such as bulldozers and cranes are owned by ICC and are included in its financial statements.

Subcontractor authorisation and payments


All sub‐contractor work is authorised by an ICC contracts manager in the contracts office. The schedule of work to be performed by sub-contractors for each contract is prepared and reviewed by ICC’s contracts manager who then completes and signs a job order form (JOF) which is filed in the contracts department in the file relating to the relevant contract. Before the JOF is filed, details of the work required are entered onto a job authorisation form (JAF) by a junior clerk. The JAF is then sent to the appropriate sub‐contractor. The JAF contains details of the work required, date for completion of the work and monetary amount payable by ICC when the work is complete.


When the sub‐contract work is complete, the sub‐contractor sends an invoice to ICC’s accounts department. The invoice contains the date that the JAF was sent to the subcontractor and the sub‐contractor provides information on the invoice for the payment to be made. A clerk in the accounts department ensures that the arithmetic on the invoice is correct and then stamps the invoice as “payment due”.


The same accounts clerk enters the sub‐contractor invoice into the computerised Purchase Day Book (PDB) and then files the invoice in order of day received. Payment is made automatically, once an invoice is entered into the PDB.


You are an audit senior in a local audit firm which was only recently appointed as external auditors to ICC.



Prepare a report for the management of ICC in which you:


  1. a) Explain why the auditor assesses the internal control systems operating at an audit client

company.                                                                         (10 Marks)


  1. b) Identify and analyse the various elements of a client company’s internal control systems that would be assessed by the auditor at the planning stage of the audit. (10 marks)


  1. c) Identify FIVE risks affecting the system for authorising and payment of subcontractors at ICC. For each risk identified explain the potential impact this could have on ICC and recommend a control which could mitigate the risk.


(30 Marks) (Report presentation 5 Marks)


10 Marks
  1. b) Describe substantive procedures that the auditor should perform on the year‐end non‐

current tangible assets of ICC.                                                                         (10 Marks)


(Total 65 Marks)





Question 1 Part 2:


The audit engagement partner of ICC requires an extension to be built onto his house which he mentioned to one of the directors of ICC at the audit planning meeting. The director indicated that while this was a relatively small contract for ICC, the company would be willing to carry out this work for a small fee.




Analyse whether the audit firm responsible for the ICC audit should allow the company to build the extension to the audit engagement partner’s house, explaining any ethical threats that would exist and what safeguards could be used to mitigate the threats.


(15 Marks)



Appropriate & professional presentation of work…….…                               ………………….………..                                                                           10 Marks


Cover sheet Contents page Introduction Main Body Conclusion

List of References

Times New Roman, Font Size 12, 1.5 Line Spacing

Headers and/ or footers containing relevant information



Academic work, structured in a clear, concise and logical manner, evidence of additional research beyond tutor provided material all referenced correctly using the Harvard Referencing





Total……………………………………………………………………………..…100 Marks


Marking scheme: BAAF III Audit & Assurance




Outstanding work which is both illuminating and insightful.  Language is fluent 70%+
and authoritative demonstrating a comprehensive knowledge, and convincing  
command of the subject matter.  Exceptionally clear and appropriately  
articulated relevant examples provided. Excellent structure.  
Evidence of a very good understanding of the issue and sound application to a 60- 69 %
particular business scenario when required.  Competent critical analysis with the  
ability to develop a clear and compelling argument.  Sufficiently developed  
examples to help illustrate students work.  
Good understanding of the underlying concepts and a good attempt at applying 50- 59%
the issues to business scenarios when required.  Good logic and structure to  
answer. Relevant examples provided to illustrate answer.  
Evidence of reading from lectures, hand-outs, recommended texts though often 45 – 49%
descriptive in nature. Reasonable use of most major points though missing some  
key elements.  Confused or unclear in parts. Relevant examples provided but  
Some relevant material but inadequate or incomplete treatment of same. 40 – 45%
Not of passing standard though shows signs of some engagement with the 30 – 39%
Serious lack of relevance; signs of lack of involvement with course material; <30%
serious confusion.