A subsidiary of the organization was preparing for an initial public offering (IPO). Af the request of the audit committee, the chief audit executive (CAE) and all senior audit staff were actively involved in the process by helping collect and validate financial data, conducting assessments, and participating in meetings with IPO advisors. Six months later, it became obvious that the IPO had to be canceled. Newly appointed audit committee members requested an assurance engagement that v/ould assess the IPO preparation process. Which of the following would be the best course of action for the chief audit executive (CAE) to take?

Question

Craig Reid · Accepted Answer

The CAE should disclose objectivity limitations to the audit committee and suggest alternatives, such as outsourcing the engagement.

Craig Reid · Answer

The decision to involve auditors in the IPO was made by former audit committee members; therefore, the CAE is not responsible and can proceed with the new assignment.

Craig Reid · Answer

The CAE should reject the assignment, as such engagements are beyond the scope of auditors who are usually not familiar with root cause analysis methodology.

Craig Reid · Answer

The engagement should be undertaken by audit assistants and other junior staff members who were not involved in the IPO process.

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