Monique Charon was recently hired as an internal auditor for a government ministry. The intemal audit department is in the process of planning an audit of travel expenses incurred by ministry employees. As part of the planning process, Monique has reviewed the relevant policy for travel. An excerpt of the policy is as follows:

• Ministry employees are responsible for obtaining approval to travel from an authorized manager before expenses are incurred.

• Ministry employees must certify that their travel expense claims are correct, comply with ministry policy, and are for business purposes.

• Ministry employees must purchase the most economical airfare for air travel. Considering operational requirements.

• Travel loyalty program benefits, such as airline frequent-flyer points that are accumulated by ministry employees while travelling at public expense, must NOT be used for personal benefit. Such benefits or discounts should be applied only against future business travel. Alternatively, ministry employees may donate accumulated loyalty plan benefits to charities associated with the loyalty program.

• Daily meal allowances when travelling will be paid in accordance with prescribed rates. These rates are determined based on the category of ministry employment as well as the length of travel and time of day.

• Where a meal is provided without charge or is paid for from government funds, NO claim for that meal can be made. Recently there has been negative publicity about government personnel in another jurisdiction submitting overstated or false claims or receiving personal benefits. This has increased public scrutiny of government spending on travel. As a result, travel expenses have been identified as having a high audit risk. Monique is responsible for planning the audit of travel expenses for her ministry,

  

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Required: a) Explain which audit assertion should have the highest inherent risk in this audit and why. Provide two points from the information provided as support for your reasoning. (3 marks) b) Assume that the previous internal auditor had started planning for a similar audit, which was NOT completed due to the auditor's subsequent transfer. The previous auditor had proposed the audit procedure below as the only substantive test for auditing meal claims: Recalculate the meal claim using the per-diem rate per the ministry employee's travel expense report, multiplied by the number of meals or travel days, whichever is appropriate. Agree the total to the amount subsequently paid. Explain one weakness with the above audit procedure. Recommend two improved audit procedures that would be effective for substantively testing meal claims. (5 marks) c) Monique is planning the substantive audit procedures for ensuring adherence to the travel loyalty program benefits policy, described in the policy excerpt. Provide two substantive audit procedures that Monique should perform. (4 marks) Required: a) Explain which audit assertion should have the highest inherent risk in this audit and why. Provide two points from the information provided as support for your reasoning. (3 marks) b) Assume that the previous internal auditor had started planning for a similar audit, which was NOT completed due to the auditor's subsequent transfer. The previous auditor had proposed the audit procedure below as the only substantive test for auditing meal claims: Recalculate the meal claim using the per-diem rate per the ministry employee's travel expense report, multiplied by the number of meals or travel days, whichever is appropriate. Agree the total to the amount subsequently paid. Explain one weakness with the above audit procedure. Recommend two improved audit procedures that would be effective for substantively testing meal claims. (5 marks) c) Monique is planning the substantive audit procedures for ensuring adherence to the travel loyalty program benefits policy, described in the policy excerpt. Provide two substantive audit procedures that Monique should perform. (4 marks)

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