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Question 669 - IIA-CIA-Part1 discussion

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An internal audit of warehouse inventory revealed no material deficiencies. However, management later discovered fraud, which occurred during the period that was audited, and determined that a major control deficiency allowed the fraud to occur. Given management's discovery, which of the following statements is valid?

A.

The internal auditors violated the standard for due professional care because they did not detect the fraud, even though it occurred during the period that was reviewed.

Answers
A.

The internal auditors violated the standard for due professional care because they did not detect the fraud, even though it occurred during the period that was reviewed.

B.

The internal auditors should have had sufficient knowledge of fraud to identify red flags indicating possible fraud.

Answers
B.

The internal auditors should have had sufficient knowledge of fraud to identify red flags indicating possible fraud.

C.

The internal auditors could not have detected the fraud due to collusion among employees in the inventory unit.

Answers
C.

The internal auditors could not have detected the fraud due to collusion among employees in the inventory unit.

D.

The internal auditors are not responsible for considering fraud risk, which is a management responsibility.

Answers
D.

The internal auditors are not responsible for considering fraud risk, which is a management responsibility.

Suggested answer: B

Explanation:

Internal auditors are required to have sufficient knowledge to identify indicators of fraud. They should recognize red flags and investigate them further, even if their primary responsibility is not to detect fraud.

Reference:

IIA Standard 1210.A2 - Proficiency: Internal auditors must have sufficient knowledge to evaluate the risk of fraud.

IIA Practice Guide on Fraud and Internal Auditors.

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asked 03/11/2024
Phuong Pham
40 questions
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