During an Audit Engagement, an Internal Auditor Finds That Management

question 327

Multiple Choice

During an audit engagement, an internal auditor finds that management is not complying with previous commitments made to the external auditors. However, the auditor determines management's actions to be justified due to significant changes in the business. The best course of action for the auditor to take would be to:

• A) Proceed with the audit engagement and assess the changes actually implemented by management.
• B) Inform the external auditors and seek their guidance.
• C) Inform the external auditors and remove the associated work from the internal audit scope.
• D) Compare the recommended changes against the changes made by management and advise management which action to take.

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Definitions:

Variable

A quantity or factor in an experiment or equation that can change or be changed.

Variable Production Cost

Costs that vary directly with the level of production output, including raw materials, direct labor, and other expenses that increase with production volume.

Sales Price

Sales Price is the amount of money charged for a product or service in the market.

Net Operating Income

A financial metric that calculates a company's profit after subtracting operating expenses but before interest and taxes.