QUESTION $2$The following internal audit report was distributed to all the major stakeholders:Background, authority and objectiveAn audit engagement was performed on the firm's cash disbursement operation to help determine the cause of an abnormally large materials cost in the manufacturing operation for the year ended $31$ December $20$XX$.$The audit engagement included a review of operations during the month of Septem$-$ber. Interval sampling was used to select $10\%$ of the documents. The testing consisted of a review of the pre$-$audit engagement operation of comparing purchase orders, receiving reports, inspection reports, supplier's invoices and the payment orders. The cash disbursement group performs a quality assurance review of the purchase process called a "pre$-$audit engagement".$\text{'}.$ The audit engagement was performed underthe authority of the audit committee of the board of directors as covered in the internal Griteria describing pre$-$audit engagement proceduresThe citeria for the esto easi dis un thie nudi engagement were the directive on preaudi engagemen ogy for pisand ens date $15$ March $2$o die chie onmentation for authenticity.provided the methelogy for pre$-$await engagement an i oVen i necroResults of audit engagement testingOur review consisted of teopern pichase pre audit engagement operation of comparing the basic information on purchase orders, receiving and inspection l coms, suppliers invoices and payment orders. Our audit engagement disclosed the folios. ing errors in payment vouchers: Incorrect address$15$ Incorrect terms$10$ Incorrect method of shipment$25$ Errors in quantities$20$ Errors in price$30$These errors were not considered excessive. However, a listing was provided for the accounts payable supervisor. It was observed that there were two new suppliers for whom a considerable number of payments were made, but there were no errors on the vouchers related to those suppliers.Conclusion and recommendationsWe do not believe that the disbursement operation has any impact on the high material costs and suggest that the inventory operation be reviewed as a possible cause.H$.$S$.$ FischerChief Audit ExecutiveAfter the internal audit engagement report was released, the following facts wereestablished:The director of the accounts payable operation had been with the firm for becaus.The director had previous assignments in the purchasing department and, because ofinitative and an innovative approach, had been promoted to director of anouns payable. The promotion was accompanied by a material change in living stand ares.noluding the purchase of two expensive vehicles, a new home and shore cottage mather, it was found that the director had established two dummy supere wo officing addresses were post rico hoes and shoe street addresses so and o service firms. The director had purchase orders, receiving repes printed. Al spection reports for the firm, and invoice chase two ticious suppliers tinted, All of the internal documents were pinnumbered because the director knew i pastero. was no accounting for the documen mumbers. The director, because of a en$-$Perience in the purchasing department, was able to prepare the forms and to enter the fictitious purchases in the purchase record cards at night.The fraud was eventually discovered when a cheque was returned by the post or$-$fice because of an obliterated waldress. The comptroller's staff inspected thee ar$-$chasing department's list of suppliers in an effort to readdress the enveloud and found that the firm was not on the list. Further investigation disclosed the traud and the director confessed to the other fraud involving the second fictitious firm.YOU ARE REQUIRED TO:$1$ Describe five features of the report that are desirable either because they are well$-$written or because they should be part of a complete internal audit report.List and justify five areas in which the report is inadequate $($because of either missing elements or poorly developed findings$).$