An Internal Auditor for a Financial Institution Has Just Completed

question 60

Multiple Choice

An internal auditor for a financial institution has just completed an audit of loan processing. Of the 81 loans approved by the loan committee, the auditor found seven loans which exceeded the approved amount. Which of the following actions would be inappropriate on the part of the auditor?

• A) Examine the seven loans to determine if there is a pattern. Summarize amounts and include in the engagement final communication.
• B) Report the amounts to the loan committee and leave it up to them to correct. Take no further follow-up action at this time and do not include the items in the engagement final communication.
• C) Follow up with the appropriate vice president and include the vice president's acknowledgment of the situation in the engagement final communication.
• D) Determine the amount of the differences and make an assessment as to whether the dollar differences are material. If the amounts are not material, not in violation of government regulations, and can be rationally explained, omit the observation from the engagement final communication.

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Definitions:

Expected Return

The mean of all the likely returns of securities or portfolios over a set period.

Growth Rate

The rate at which a company's earnings, revenue, or other financial metrics increase on a year-on-year basis expressed as a percentage.

Annual Dividend

The total dividend payments issued by a company to its shareholders in a year.

Expected Return

The weighted average of all possible returns, considering the probabilities of each outcome.