(PLS HELP)

CASE 1:

CASE ANALYSES no.2 Sansa, Inc. is a subsidiary of Arya Publishing and specializes in the publication and distribution of reference books. Sansa's sales for the past year exceeded P20 million, and the company employed an average of 65 employees. Arya periodically sends a member of its internal audit department to audit the operations of each of its subsidiaries, and Cersei Lannister, Sansa's treasurer, is currently working with Brandon Cruz of Arya's internal audit staff. Brandon has just completed a review of Sansa's investment cycle and prepared the following report. General: Throughout the year, Sansa has made both short-tenn and long-term investments in securities registered in the company's name. According to Sansa's bylaws, long-term investment activity must be approved by its board of directors, while short-term investment activity may be approved by either the president or the treasurer. Transactions: Sansa has a computer link with its broker; thus, all buy and sale orders are transmitted electronically. Only individuals with authorized passwords may initiate certain types of transactions. All purchases and sales of short-tenn securities in the year were made by the treasurer. Also, two (2) purchases and one sale of long-term securities were executed by the treasurer. The long-term security purchases were approved by the board. The president, having online authorization access to all transactions, was able to approve a sale of long-term security. The president is given access to authorize all transactions engaged in by the rm. Because the treasurer is iisted with the broker as the company's contact, all revenue from these investments is received by this individual, who then forwards the checks to accounting for processing. Documentation: Purchase and sales authorizations and brokers' advice, are maintained in an electronic le with authorized access by the treasurer. Brokers' advice is received verbally on the phone, and this advice is noted on a broker advice form. This form is led by the treasurer. The certicates for all long-term investments are kept in a safe deposit box at the local bank; only the president of Sansa has access to this box. An inventory of this box was made, and all certicates were accounted for. Certicates for short-term investments are kept in a locked metal box in the accounting ofce. Other documents, such as long-term contracts and legal agreements, are also kept in this box. There are three (3) keys to the box held by the president, treasurer, and the accounting manager. The accounting manager's key is available to all accounting personnel, should they require documents kept in this box. Certicates of investments may take up to four (4) weeks to receive after the purchase of the investment. An electronic inventory list is kept perpetually. The data are keyed in by accounting personnel who receive a buylsale transaction sheet from the treasurer. The president, treasurer, and accounting manager all have passwords to access and update this inventory list. The accounting manager's password is known by two accounting supervisors in case the inventory list needs to be updated when the accounting manager is not available. Documentation for two (2) of the current short-tenn investments could not be located in this box; the accounting manager explained that some of the investments are for such short periods that the broker does not always provide formal documentation Accounting Records: Deposits of checks for interest and dividends earned on investments are recorded by the accounting department, but these checks could not be traced to the cash receiptsjournal maintained by the individual who normally opens, stamps, and logs incoming checks. These amounts are journalized monthly to account for investment revenue. Electronic payments for investment purchases are authorized by the treasurer. If the amount is in excess of P15,000, an authorization code given by the treasurer or president is necessary. Each month, the accounting manager and the treasurer prepare the journal entries required to adjust the short-term investment account. There was insufcient backup documentation attached to the journal entries reviewed to trace all transactions; however, the balance in the account at the end of last month closely approximates the amount shown on the statement received from the broker. The amount in the long-term investment account is correct, and the transactions can be traced through the documentation attached to the journal entries. No attempts are made to adjust either account to the lower between aggregate cost or market. To achieve Solomon Publishing's objective of sound internal control, the company believes the following four (4) controls are the basics for an effective system of accounting control. 0 Authorization of transactions; . Complete and accurate record-keeping; . Physical control; and 0 Internal verication. Direction: Read the given scenario and answer the given questions. ISACA Definition and Function Treadslsone Company has an internal audit department consisting of a director and four (4) staff auditors. The director of internal audit, Mark Tan, reports to the corporate controller, who receives copies of all internal audit reports. Also, copies of all internal audit reports are sent to the audit committee of the board of directors and the individual responsible for the area of activity being audited. In the past, the company's external auditors have relied on the work of the internal audit department to a substantial degree. However. in recent months, Mark has become concerned that some standards in the performance of the internal audit function are being affected by the nonaudit work being performed by the department. The possible failure to meet such standards could result in more extensive testing and analysis by the external auditors. The percentage of nonaudit work performed by the internal auditors has steadily increased to about 25% of the total hours worked. A sample of 5% non-audit activities follows: One of the internal auditors assisted in the preparation of policy statements on internal control. These statements included such things as policies regarding sensitive payments and the safeguarding of assets. Reconciling the corporation's bank statements each month is a regular assignment of one of the intemal auditors. The corporate controller believes this strengthens the internal control function because the internal auditor is not involved in either the receipt or the disbursement of cash- The internal auditors are asked to review the annual budget each year for relevance and reasonableness before the budget is approved. At the end of each month, the corporate controller's staff analyzes the variances from the budget and prepares explanations of these variances. The internal audit staff then reviews these variances and explanations. One of the internal auditors has been involved in the design, installation, and initial operation of a new computen'zed inventory system. The auditor was primarily concerned with the design and implementation of internal accounting controls and evaluated these controls during the test runs. The internal auditors are sometimes asked to make the accounting entries in the accounting system for complex transactions as the accounting department employees are not adequately trained to handle such transactions. The corporate controller believes this gives an added measure of assurance to the accurate recording of these transactions. Questions: 1. Give at least one (1) ISACA standard that was being violated from the above case. Justify your answer in no more than five (5) sentences. 2. Concerning question number 1. what are the requirements in the code of ethics that have been violated, supposing that the auditors are ISAC-A members? Justify your answer in no more than ve (5) sentences. 3. In connection with number 1, give possible actions that can be done to uphold the standard being violated