Upon Discovering Fraud, Internal Auditors

question 20

Multiple Choice

Upon discovering fraud, internal auditors:

• A) must fully investigate it and determine perpetrators, value, damage, and recommend possible action.
• B) should only continue their investigation if the fraud is in the present or immediately previous period.
• C) have an obligation to notify management or the board of directors when the incidence of significant fraud has been established to a reasonable degree of certainty.
• D) must provide the audit committee and the board of directors with a preliminary written statement detailing the known facts and presenting reasonable suspicions as to perpetrators, values, methods, and time periods affected.

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Definitions:

Replacement Projects

Investments undertaken to replace old or obsolete assets with new ones, aiming to maintain or enhance efficiency, productivity, or the competitive position of a business.

Sunk Costs

Costs that have already been incurred and cannot be recovered, and thus should not factor into the decision-making process for future investments.

Internal Rate of Return (IRR)

A metric used in capital budgeting to estimate the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows equal to zero.

Net Present Value (NPV)

A method used in capital budgeting to assess the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.