Can the Auditor Be Blamed for Not Knowing How Their Client Handwriting?

[Ulysses Kwaku Nubueke]

Elikem work at the Internal Audit. She is assigned to a small unit within a service providing company. Elikem was assigned to inspect and verify all items procure at the unit. She is to see to it that all items listed on the invoice(s) are checked against the physical goods bought and ensure that they are entered on tally cards of Assets Register.

Elikem does not have an office at the small unit she was assigned, but anytime goods are bought, she is called to do inspection before the items are used.

During the post audit, it was realised that most of the invoices were written by the supervisor of the small unit who was making the purchases. A search in the supervisor's drawer revealed some of the blank invoices the supervisor was using.

It was observed that the supervisor was issuing invoices to cover goods that were already inspected and represented to Elikem to inspect. Elikem was not aware of what the supervisor was doing since the small unit purchase same items on regular basis.

The supervisor accepted the wrong doings. But Elikem was blamed to not have performed her duties well especially of her inability to detect the handwriting of the supervisor, and she should face disciplinary committee.

You are required:
1. To explain wether or not Elikem did not perform her duties well.
2. Can internal audit staff for that matter Elikem be blamed or sanctioned for not detecting the handwriting of the supervisor?
3. If your answer to question 2. is yes, kindly explain why.
4. What measure would you put in place to ensure that goods procure already are not represented.

[Vanessa]

1.
a. The scope of work assigned to Elikem was to ensure that all items purchased by the client were physically received and recorded in the books.

b. Elikem was expected to report to the audit committee if the internal controls were inadequate and also if the internal controls were not operating according to the internal controls which were set up by the management.

c. In the instant case if Elikem had carefully assessed the adequacy of the internal controls the supervisor would not have been able to carry out the fraudulent activities.

d. The internal controls which exist appear inadequate. This is because the supervisor who purchased the materials prepared the invoices. If the internal controls were designed well then all the goods which were purchased (along with the vendor’s invoice) would have been inspected and recorded at the security gate. The goods would then have entered the stores area where all the goods are received. The materials would have been verified along with the vendor’s invoice by the person in charge of this area. Such a control would have not permitted the supervisor to carry out the fraud.

e. Therefore it appears that Elikem has not performed her duties well.

2.
I don’t think the internal auditor can be blamed for not detecting the handwriting of the supervisor. This is because the invoice is prepared by the vendor whose handwriting can match with the handwriting of the supervisor. However if Elikem had assessed the inadequacy of the existing controls properly, then she would have sensed the fraud.

3. Not applicable

4. The measures which should be in place to ensure that goods procure already are not represented are as follows:

a. Whenever goods were received they should be inspected at the security gate along with the vendor’s invoice. The security gate must also record the receipt of the materials in the inward register available at the gate. The inward register must be entered serially. The security staff must stamp on the copy of the vendor’s invoice to indicate the receipt of materials along with date, time and the serial number allotted to the item in the inward register.

b. The goods must be directly sent to the goods inward section, where the staff counts the material and also confirms that the material had a valid purchase order. If the material did not have a valid purchase order then the materials must be returned back to the vendor. However, if the materials have a valid purchase order, then the stores must prepare a goods inward note and the materials must be handed over to the inspection department for testing its quality. If the materials meet with the set quality standards the inspection department staff must approve on the goods inward note and the goods inward note must be recorded in the stores ledger.

[Dazy]

i agree to venessa's answer. i have the same view.