During an Audit Engagement in an Insurance Company, an Internal

question 150

Multiple Choice

During an audit engagement in an insurance company, an internal auditor discovered that senior management had purposely misclassified $200, 000 in assets on financial statements submitted to regulatory authorities in order to avoid significant statutory penalties. To remain in compliance with the IIA Code of Ethics, what would be the most appropriate action for the auditor to take?

• A) Note the situation in the workpapers and inform the chief executive officer.
• B) Send an informative memo to the external auditors.
• C) Discuss the matter with audit management and ensure that the audit committee is informed.
• D) Report the matter to regulatory authorities since senior management is implicated.

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Definitions:

Internal Versus External

A comparison between things happening within an organization or entity (internal) versus influences or actions originating from outside (external).

Solicited Versus Unsolicited

The comparison between requested and unrequested information, proposals, or submissions.

Yardstick Approach

A method of evaluation that uses a specific standard or benchmark as a basis for comparison or judgment.

Organizational Approach

A method or strategy used by an organization to achieve its goals, often involving structure, planning, and management practices.