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Question 599 - IIA-CIA-Part1 discussion

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During the planning stage of an assurance engagement, a payroll clerk informed the internal auditor that he is often asked to add new employees to the payroll without any formal new-hire documentation from human resources. The auditor is concerned that this increases the risk for fraud. To complete engagement planning, which of the following is the most appropriate next step for the auditor to take?

A.

Increase the sample size to be tested, ensuring a thorough review of the payroll records.

Answers
A.

Increase the sample size to be tested, ensuring a thorough review of the payroll records.

B.

Advise the chief audit executive of the clerk's assertion, despite the lack of supporting evidence.

Answers
B.

Advise the chief audit executive of the clerk's assertion, despite the lack of supporting evidence.

C.

Ask the clerk to provide a list of any suspicious new employee names on the payroll.

Answers
C.

Ask the clerk to provide a list of any suspicious new employee names on the payroll.

D.

Investigate the matter further to understand precisely how many payroll records were affected.

Answers
D.

Investigate the matter further to understand precisely how many payroll records were affected.

Suggested answer: B

Explanation:

When a payroll clerk informs the auditor of potential issues like adding new employees to the payroll without proper documentation, it is essential to escalate this concern appropriately. The internal auditor should inform the chief audit executive (CAE) of the assertion, as it raises a significant red flag regarding potential fraud or control weaknesses. This step ensures that the CAE is aware of the situation and can decide on the necessary follow-up actions, such as further investigation or adjusting the audit scope to address the risk.

IIA Standard 1220: Due Professional Care

IIA Standard 2120: Risk Management

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asked 03/11/2024
Nisanka Mandara
39 questions
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