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    1. The internal auditor should have immediately raised concerns about the excessive employee turnover at Bes Corporation to management. High turnover can negatively impact employee morale and confidence in the organization. 2. Recommendations to address the excessive turnover include reviewing labor practices and ensuring employees are not overworked. The auditor also recommended hiring more employees, improving training, and expanding the HR department to help reduce turnover. 3. There may have been objectivity issues with Bes Corporation. The internal audit department was involved in a computer feasibility study which could have biased their recommendation. An investigation into product defects that injured customers also was not fully conducted, which could be to avoid liability.

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    1. The internal auditor should have immediately raised concerns about the excessive employee turnover at Bes Corporation to management. High turnover can negatively impact employee morale and confidence in the organization. 2. Recommendations to address the excessive turnover include reviewing labor practices and ensuring employees are not overworked. The auditor also recommended hiring more employees, improving training, and expanding the HR department to help reduce turnover. 3. There may have been objectivity issues with Bes Corporation. The internal audit department was involved in a computer feasibility study which could have biased their recommendation. An investigation into product defects that injured customers also was not fully conducted, which could be to avoid liability.

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    2K views3 pages

    Case 1

    Uploaded by

    Brian Go
    1. The internal auditor should have immediately raised concerns about the excessive employee turnover at Bes Corporation to management. High turnover can negatively impact employee morale and confidence in the organization. 2. Recommendations to address the excessive turnover include reviewing labor practices and ensuring employees are not overworked. The auditor also recommended hiring more employees, improving training, and expanding the HR department to help reduce turnover. 3. There may have been objectivity issues with Bes Corporation. The internal audit department was involved in a computer feasibility study which could have biased their recommendation. An investigation into product defects that injured customers also was not fully conducted, which could be to avoid liability.

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    © All Rights Reserved
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    of 3

    CASE ANALYSIS 1

    (AUD 1206 Operations Auditing)

    1. What are the procedures to be done in terms of the fieldwork stage of an


    internal auditor as a response to audit finding number 1 (excessive turnover)?

    One thing that the auditor may have done was to raise the concern immediately.
    Internal control deficiency is primarily related to operations. Auditors need to report the
    concerns to management or to those charged with governance to avoid further impact.
    They need to know what was going on in the operation and make them understand the
    negative impacts that may happen if not avoided. Eventually, such a high turnover rate
    may result in low employee morale. Its immediate consequences could be extreme
    because it could make employees lose confidence within the organization. In this kind of
    situation, it is important to communicate and give suggestions that will make the
    company better.

    2. What are your possible recommendations as an internal auditor as a response


    to audit finding number 1 (excessive turnover)?

    As auditors the possible recommendations that we can recommend as a


    response to the audit findings on excessive turnover is to go over their current labor
    practices. Since overworked and dissatisfied workers who have had increased tasks
    and responsibilities owing to a lack of an engaged or skilled workforce are one of the
    primary reasons we find for high employee turnover. Which is why the suggestions that
    we can give are the following: (1) To reduce the high effort, create a changing timetable.
    (2) Assure that these personnel are rewarded, and that extra labor is properly tracked
    so that they will be fairly compensated. (3) Provide workers with bonuses and rewards
    in exchange for their contributions to the firm. (4) Improve their vacation/sick leave
    benefits to make it more acceptable for employees to return. and (5) to recruit and train
    additional people so that the job is divided and not centered on a few people. Another
    recommendation is to deal with the human resource department since they are
    assigned for the recruitment and selection of possible employees. They are also in
    charge of employee training and development. We would recommend that H.R.
    department should (6) hire the right employees to the right jobs, (7) allot sufficient
    training and development programs for the employees, and (8) expand the department’s
    workforce to lessen turnover.

    3. Based on the case, are there any objectivity problems with Bes Corporation?
    Explain.
    There may have been objectivity problems with Bes Corporation as its internal
    audit department was involved in a computer feasibility study which requires an
    assessment on acquisition of a particular computer system. Since the department has
    been active in the study, they may have advised the purchase of the system not
    because it can be valuable to the company but rather it gives them a personal sense of
    achievement as the specific computer system sufficed the feasibility study they are
    participating in.
    Another instance wherein objectivity of Bes Corporation may be in question is the
    defect detected on their products. The defect was known after several injuries, however,
    they had dismissed the idea of conducting a proper investigation to prove whether the
    injuries were really caused by the defect or not. Objectivity may be questioned because
    if the investigation concludes that the injuries were indeed caused by the defect, then it
    could result in possible lawsuits that may bear the company risks or losses which only
    infers that investigation may not have been conducted to avoid possible losses.

    4. What if the internal audit department is part of the corporation's controllership


    function, and copies of the internal audit reports are sent to the board of
    directors, evaluate the appropriateness of the location of the internal audit
    department within Bes’ organizational structure.
    The corporation's internal audit department appears to be out of place in relation
    to its position within the company. Internal audit acts as a watchdog and, in a sense, a
    check and balance for the controllership function. When it comes to examining financial
    reporting difficulties or internal control deficiencies, they should be impartial and
    unbiased. As a result, I believe it is preferable to establish an audit committee that
    reports directly to people in charge of governance and is not part of the controllership
    job. Bias, conflicts of interest, or undue influence should not be allowed to undermine
    professional or business judgements.

    5. Who are those within Bes should receive the reports of the internal audit
    department?
    For functional purposes, the staff of the internal audit department should give its
    reports to the Chief Audit Executive (CAE) who reports to the Audit committee or the
    board directly. The Audit Committee is responsible for overseeing internal and external
    audit functions and should be intrinsically independent. They check management and
    assist in the external financial statements’ users in assuring that the financial
    statements would reflect the company’s business activities, all internal controls are
    working efficiently, and the company’s compliance to the laws and regulations that
    apply. It is recommended that the Chairman of the Audit committee is not the chairman
    of the board or of any other committee (Perlas et al., 2022). As for this case, the internal
    auditing director is also the assistant controller in the corporate headquarters, which
    poses independence problems as he may manipulate data which is pleasing only to the
    eyes of the board of directors. Hence, the audit reports should be received by the Chief
    Audit Executive, Audit Committee, and most importantly the Board of Directors.

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