AUI3703 ASSIGNMENT 3 SOLUTIONS 2021 SEMEMSTER 1 AND 2
Question 1 (25 marks)
The Audit and Risk Committee of Department of Transport has mandated the internal audit
activity to perform a preliminary investigation to determine whether there are any fraudulent
activities in the Student Transport Programme funds.
After a week of preliminary investigation, you had an informal progress meeting with the
Manager: Internal Audit. He informs you that inadequate internal controls have not only given
rise to the flooding of illegal operators but has also led to unnecessary fatalities on the road. In
addition, there are several complaints from school principals regarding students arriving late at
school, either because they were walking or due to vehicle break-downs. According to one of
the principals, one morning a minibus arrived carrying 33 students in a 21-seater minibus.
Furthermore, management does not require monthly reports on the Student Transport
Programme. As a result, the responsible manager, Mr. Ruan Sabie does not show interest in
addressing falsified claims by service providers on safety issues. Mr. Sabie only works with
one staff member to assist in the division and does not show interest in recruiting additional
staff members. Despite service providers being paid hundreds of thousands rands per month,
there are false travel claims submitted for routes and pickup points that are not in the approved
route list.
The Risk Manager sent the auditors a picture received through anonymous reporting of students
being transported in heavily overloaded and unsafe vehicles. The auditors struggled to obtain
a number of documents such as, tender documents, contracts and roadworthiness certificates
of vehicles to determine the validity of the claims paid.
An audio clip of a service provider, Mr. Pare, was also shared through the hotline. In the audio
Mr. Pare was heard stating that he only had one bus instead of eight (8) vehicles as indicated
in the tender documents. The auditors then checked the bus registration details and it transpired
that Mr. Ruan Sabie was the owner instead of Mr. Pare.
The Finance Manager stated that he has been Mr. Sabie’s neighbour for the past 10 years and
noticed a drastic lifestyle change in Mr. Sabie in the past year. He demolished his house and
built a double storey house, bought his wife a VW Touareg and his kids have moved from the
public school to a private school. Last weekend, a bus parked next to Mr. Sabie house the whole
weekend and he recognised the registration number from one of the claims he recently paid.
, REQUIRED MARKS
1.1 Identify eight (8) red flags that can be observed from the scenario. (8)
1. students arriving late at school, either because they were walking or
due to vehicle break-downs.
2. minibus arrived carrying 33 students in a 21-seater minibus
3. management does not require monthly reports on the Student Transport
Programme
4. Mr. Ruan Sabie does not show interest in addressing falsified claims
by service providers on safety issues
5. Mr. Sabie only works with one staff member to assist in the division
and does not show interest in recruiting additional staff members.
6. service providers paid hundreds of thousands rands per month, there
are false travel claims submitted for routes and pickup points that are not
in the approved route list
Question 1 (25 marks)
The Audit and Risk Committee of Department of Transport has mandated the internal audit
activity to perform a preliminary investigation to determine whether there are any fraudulent
activities in the Student Transport Programme funds.
After a week of preliminary investigation, you had an informal progress meeting with the
Manager: Internal Audit. He informs you that inadequate internal controls have not only given
rise to the flooding of illegal operators but has also led to unnecessary fatalities on the road. In
addition, there are several complaints from school principals regarding students arriving late at
school, either because they were walking or due to vehicle break-downs. According to one of
the principals, one morning a minibus arrived carrying 33 students in a 21-seater minibus.
Furthermore, management does not require monthly reports on the Student Transport
Programme. As a result, the responsible manager, Mr. Ruan Sabie does not show interest in
addressing falsified claims by service providers on safety issues. Mr. Sabie only works with
one staff member to assist in the division and does not show interest in recruiting additional
staff members. Despite service providers being paid hundreds of thousands rands per month,
there are false travel claims submitted for routes and pickup points that are not in the approved
route list.
The Risk Manager sent the auditors a picture received through anonymous reporting of students
being transported in heavily overloaded and unsafe vehicles. The auditors struggled to obtain
a number of documents such as, tender documents, contracts and roadworthiness certificates
of vehicles to determine the validity of the claims paid.
An audio clip of a service provider, Mr. Pare, was also shared through the hotline. In the audio
Mr. Pare was heard stating that he only had one bus instead of eight (8) vehicles as indicated
in the tender documents. The auditors then checked the bus registration details and it transpired
that Mr. Ruan Sabie was the owner instead of Mr. Pare.
The Finance Manager stated that he has been Mr. Sabie’s neighbour for the past 10 years and
noticed a drastic lifestyle change in Mr. Sabie in the past year. He demolished his house and
built a double storey house, bought his wife a VW Touareg and his kids have moved from the
public school to a private school. Last weekend, a bus parked next to Mr. Sabie house the whole
weekend and he recognised the registration number from one of the claims he recently paid.
, REQUIRED MARKS
1.1 Identify eight (8) red flags that can be observed from the scenario. (8)
1. students arriving late at school, either because they were walking or
due to vehicle break-downs.
2. minibus arrived carrying 33 students in a 21-seater minibus
3. management does not require monthly reports on the Student Transport
Programme
4. Mr. Ruan Sabie does not show interest in addressing falsified claims
by service providers on safety issues
5. Mr. Sabie only works with one staff member to assist in the division
and does not show interest in recruiting additional staff members.
6. service providers paid hundreds of thousands rands per month, there
are false travel claims submitted for routes and pickup points that are not
in the approved route list
