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Question 362 - IIA-CIA-Part2 discussion

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During an engagement in one of the subsidiaries of an organization, an internal auditor noted the following in the workpapers:

'As a subsidiary of a multinational organization in this particular country, the entity is required to register annually with the respective ministry. However, the subsidiary did not submit the required documentation for registration during the prior year. Failure to comply with internal and external regulations could lead to penalties or fines from the respective authorities. It is recommended that the management of the subsidiary ensures compliance with the relevant legislation. As a recoverable action, management should register the subsidiary in the current year as soon as possible.'

What part of this narrative represents a condition of the observation made by auditors in the final report?

A.
' ... the subsidiary did not submit required documentation for registration in the prior year.'
Answers
A.
' ... the subsidiary did not submit required documentation for registration in the prior year.'
B.
' ... the entity is required to register annually with the respective ministry.'
Answers
B.
' ... the entity is required to register annually with the respective ministry.'
C.
' ... failure to comply with internal and external regulations might lead to penalties or fines from the respective authorities.'
Answers
C.
' ... failure to comply with internal and external regulations might lead to penalties or fines from the respective authorities.'
D.
' ... management should register the subsidiary in the current year as soon as possible
Answers
D.
' ... management should register the subsidiary in the current year as soon as possible
Suggested answer: A

Explanation:

.' In internal auditing, the 'condition' of an observation refers to the specific state or situation that has been identified during the audit. It describes what is actually occurring and provides the factual basis for the observation. In this case, the statement '... the subsidiary did not submit required documentation for registration in the prior year.' explicitly describes the observed deficiency, which is the failure to submit the necessary documentation. This condition highlights the exact issue that needs to be addressed by management.

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asked 18/09/2024
Barbara Bailey
42 questions
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