AUDIT ASSIGNEMENT

Audit assignement

Audit assignement

Introduction

MEM Engineering Inc is a very old family business producing sophisticated mechanical devices for domestic and commercial purposes. The inherent risk factor for MEM business is that its machinery is too old and the two former employees have started their own business. So, MEM is facing competition from its former employees who have latest machinery and equipment for producing the same product. The sales process of MEM Inc is very complicated and time consuming. It takes too long to process and order for disbursement to the production department. Due to this reason, many of the existing customers can switch to industry competitors resulting in decrease in the market share. MEM Inc's major supplier is Germany based which is producing 30% of the raw material to MEM. This is a very risky factor as the major supplier should be based in home country.

The scope of internal audit at MEM is to ensure the effective and regular review of all operational, financial and related activities. Internal audit coverage extends to all areas of the organisation i.e. financial, accounting, administrative and operational activities. The extent and frequency of internal audits depend upon an assessment of the risks pertaining to the achievement of the organisation objectives. The scope of internal auditing extends to all aspects of institutional operations and beyond fiscal boundaries. The scope of Internal Audit encompasses the examination and evaluation of the adequacy, effectiveness and efficiency of the system of internal control and management performance. The internal auditor should have access to all records, personnel, and physical properties relative to the performance of duties and responsibilities. The scope of a particular internal audit activity may be as broad or as restricted as required to meet management needs. Objectivity is essential to the internal audit function.

Risk

At MEM, business risk embraces all risks to the achievement of corporate objectives, not just the financial and accounting risks that are the traditional focus of internal audit activity. A common language for executive and line management is the concept of risk, in particular, business risk. Their needs, and their expectations for internal audit, are centred on the effective management of risk through its minimisation to acceptable levels. Internal audit needs to take a major role in this regard by working with executive and line management to assist in the identification and assessment of business risks of MEM Inc. Internal audit's attitude to the continuous improvement of its own processes signals its commitment to ensuring that it remains responsive to any changes in circumstances, within and outside MEM. Internal Audit provides analysis, appraisals, and recommendations on the operations reviewed. This is achieved by examining and evaluating the adequacy, effectiveness and efficiency of systems of internal control and the quality of management in an independent and professional manner. Post-implementation reviews should be conducted by Internal Audit of all systems, developed for use by MEM, in order to evaluate the adequacy and effectiveness of internal controls, where considered ...