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Which of the following best demonstrates that the internal audit activity is using due professional care?
Demonstrating due professional care involves using appropriate technology and data analysis techniques to enhance the audit's effectiveness and efficiency. These tools help auditors identify anomalies, trends, and potential areas of risk more accurately and timely, reflecting a higher standard of care in their audit activities.
'Auditing Standards and Guidelines,' which emphasize the importance of using advanced techniques in audit processes.
An internal auditor has discovered that duplicate payments were made to one vendor Management has recouped the duplicate payments as a corrective action Which of the following describes managements action in this case?
Introduction:
When duplicate payments are identified and corrected, the management's response typically addresses the immediate impact or effect of the issue.
Types of Action Plans:
Condition-Based: Addresses the condition or the issue itself.
Cause-Based: Focuses on the underlying cause of the issue.
Root Cause-Based: Delves deeper to identify and address the fundamental reason for the issue.
Effect-Based: Focuses on addressing the consequences or the effects of the issue.
Options Analysis:
Option A: A condition-based action plan would involve identifying and rectifying the condition that led to the duplicate payments.
Option B: A cause-based action plan would address the immediate causes of the duplicate payments.
Option C: A root cause-based action plan would investigate and mitigate the fundamental reasons behind the duplicate payments.
Option D: An effect-based action plan addresses the consequences of the duplicate payments, such as recouping the funds, which is what management did in this scenario.
Conclusion:
Management's action in recouping the duplicate payments is an effect-based action plan as it focuses on addressing the impact of the error.
Internal Audit Standards and Practice Guides .
An organization does not have a formal risk management function. According to the Standards, which of the following are conditions where the internal audit activity may provide risk management consulting?
1. There is a clear strategy and timeline to migrate risk management responsibility back to management.
2. The internal audit activity has the final approval on any risk management decisions.
3. The internal audit activity gives objective assurance on all parts of the risk management framework for which it is responsible.
4. The nature of services provided to the organization is documented in the internal audit charter.
Conditions for Risk Management Consulting by Internal Audit:
Strategy and Timeline for Migration: The internal audit activity can provide risk management consulting if there is a clear strategy and timeline to transfer risk management responsibilities back to management. This ensures a temporary arrangement with a defined end goal.
Documentation in Internal Audit Charter: The nature of services provided, including risk management consulting, must be documented in the internal audit charter. This formalizes the internal audit activity's role and ensures transparency and alignment with organizational governance.
IIA Standards:
Standard 1130 -- Impairment to Independence or Objectivity: When internal auditors perform risk management roles, it must not impair their objectivity. Clear documentation and a transition strategy mitigate potential conflicts of interest.
Standard 2050 -- Coordination and Reliance: Internal auditors must coordinate with other assurance providers, ensuring roles are clear and documented.
Inappropriate Conditions:
Final Approval on Risk Management Decisions: The internal audit activity should not have final approval on risk management decisions, as this impairs independence and objectivity.
Objective Assurance on Own Work: Providing objective assurance on parts of the risk management framework for which the internal audit activity is responsible creates a conflict of interest.
Reference:
The conditions under which internal audit can provide risk management consulting must include a clear strategy for migrating responsibilities back to management and documentation in the internal audit charter to ensure transparency and avoid conflicts of interest.
The internal audit activity plans to assess the effectiveness of management's self-assessment activities regarding the risk management process. Which of the following procedures would be most appropriate to accomplish this objective?
To assess the effectiveness of management's self-assessment activities regarding the risk management process, internal auditors should directly observe and test the control and monitoring procedures.
This hands-on approach allows auditors to verify the implementation and functionality of risk management controls and the accuracy of related reporting.
Direct observation and testing provide the most reliable evidence of the effectiveness of these procedures
A chief audit executive (CAE) following up on action plans from previously completed audits identifies that management has determined that certain action plans are no longer necessary If the CAE disagrees with managements decision, which of the following is the most appropriate next step for the CAE to take?
Introduction:
The chief audit executive (CAE) must ensure that audit recommendations are appropriately addressed and that any disagreements with management's decisions are resolved effectively.
Escalation Process:
If the CAE disagrees with management's decision to not implement certain action plans, it is important to escalate the issue to the board to ensure that risks are properly managed and that there is accountability.
Options Analysis:
Option A: Discussing with senior management is a preliminary step but may not resolve the issue if there is still disagreement.
Option B: Discussing with key shareholders is not typically within the CAE's direct line of reporting and may not be appropriate.
Option C: Legal counsel can provide advice, but the final decision on audit matters typically rests with the board.
Option D: The most appropriate step is for the CAE to discuss the matter with the board, as they have the ultimate oversight responsibility and can ensure that management's decisions align with the organization's risk management and governance frameworks.
Conclusion:
The CAE should discuss the matter with the board to ensure that management's decision is aligned with the organization's risk management strategy and to address any unresolved issues.
Internal Audit Standards and Practice Guides .
