Question

Under a program that commenced 30 months ago, the social services department of a large city has been awarding contracts to provide day-care services for children of mothers who attend special training programs to improve their work skills. Each year, the city awards 10 contracts, each for $75,000. The same 10 providers have received contracts in each of the three years. The providers are required to keep records of their costs to perform the contracts, but the contracts do not specify what constitutes an “allowable” contract cost, nor do they specify any limits on what constitutes “reasonable” costs. Providers are also required to return any unspent contract funds to the city, but none of the providers returned any “unspent contract funds” after either completed year. Providers are also required to keep attendance records, but are not required to send attendance reports to the city. The new chief of the social services agency asks you to audit the program, reviewing the procedures of day-care program manager and making whatever visits to the day-care providers that you consider necessary.

Required: Describe eight specific audit procedures, stating why each procedure will help you determine the efficiency and effectiveness of this program. (Remember that you are doing the audit in the middle of the third year of the program.)

Answer 1

1. Firstly Understand what is Audit procedure:

This is the technique, performance, process or activities whcich auditor perform to obtain the conclusion and express his opninion that such activities are acheiving their objective or not.

2. As an auditor following are some of the procedure which i will perform to check the effectivness and efficeincy of the programe

1.Planing & Prepration:

• I will prepare the plan to perform the audit of the day care services.
• I will collect the information of the other contractor who provide the same services like: at what cost they provide the services, No. of workers involved to provide the services, Avg time taken to provide the services to per baby
• What are the structure of contractor cost , what are the average cost incurred to provide the services.

2.Understand : As an auditor,

• I wil understand what types of the work performed by the Contractors at their level.
• How they performed theier work.
• What are the different types of inputs required to complete their work.

3.Inquiry :

• Conduct inquiries of employees involved in the initiating and completion of care services.
• Inquiries related to the internal controal.

4. Analytical Procedure:

• Year on Year input output ratio analysis.
• Year on year expenses analysis
• Trend analysis like: For particular work how much employee have been deployed
• What are the average cost of per baby care services then compute the amount.

5. Observation:

• Its supports the inquiry of the management and also provides the information about the contractors and their working enviourment.
• While visiting the contractor site , I can observe the preocess adopted by the contractors to provide the day care services.

6. Inspection:

• It is a verification/ vouching of the documents.
• While visiting contractor site I can vouch the supporting documents agiants which expenses have been claimed.
• While I am visiting the mid of the 3rd Year , I can also compare this year expeses integrity with the earlier year expesnes.

7. Reperforming:

• I can reperform the some of calculation to check the efficiency of the calculation done by the contractor.

8. Internal Control Procedure:

• I will check the effectivenss of internal control , wether managemnt have applied it strictly or not.
• Who are the authorities of approval , what are the limites they have , is appropriate level of authority onvolved or not.