IIA-CHAL-QISA Exam - Topic 3 Question 21 Discussion

Actual exam question for IIA's IIA-CHAL-QISA exam

Question #: 21
Topic #: 3

While auditing an organization's credit approval process, an internal auditor learns that the organization has made a large loan to another auditors relative. Which course of action should the auditor take?

AProceed with the audit engagement, but do not include the relative's information.

BHave the chief audit executive and management determine whether the auditor should continue with the audit engagement.

CDisclose in the engagement final communication that the relative Is a customer

DImmediately withdraw from the audit engagement

Show Suggested Answer

Suggested Answer: B

Identify the Conflict of Interest: The internal auditor learns about a large loan made to another auditor's relative, which represents a conflict of interest.

Refer to Professional Standards: According to the Institute of Internal Auditors' (IIA) standards, an internal auditor must maintain objectivity and avoid conflicts of interest (IIA Standard 1100 -- Independence and Objectivity).

Escalate the Issue: The appropriate course of action is to escalate this matter to the chief audit executive (CAE) and management, as they are responsible for determining the impact of the conflict and the appropriate response.

Decision Making: The CAE and management will assess whether the conflict of interest could impair the auditor's objectivity and decide whether the auditor should be removed from the engagement or if additional oversight is needed.

Documentation: It is important to document the conflict and the decision-making process in the audit documentation for transparency and accountability.

The IIA's International Standards for the Professional Practice of Internal Auditing, specifically Standard 1100 on Independence and Objectivity.

by Royal at Jan 22, 2025, 05:48 AM

Limited Time Offer

25%

Off

Get Premium IIA-CHAL-QISA Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Dulce

4 months ago

Not sure about B, feels like a conflict of interest.

upvoted 0 times

...

Blair

4 months ago

C seems right, transparency is key here!

upvoted 0 times

...

Dean

4 months ago

Wait, is it really okay to loan to a relative?

upvoted 0 times

...

Cassie

5 months ago

I think D is too extreme, just disclose it.

upvoted 0 times

...

Sabine

5 months ago

Definitely B, management needs to weigh in on this.

upvoted 0 times

...

Angelica

5 months ago

I’m leaning towards option D, but I’m not completely sure if withdrawing is always necessary in these cases.

upvoted 0 times

...

Lai

5 months ago

I think I read a case study where the auditor had to disclose similar situations, so maybe option C could be the right choice here?

upvoted 0 times

...

Luis

5 months ago

I’m a bit unsure, but I feel like option B makes sense since it involves consulting with higher management about the conflict.

upvoted 0 times

...

Sina

5 months ago

I remember discussing conflicts of interest in class, and I think the auditor should definitely not proceed without addressing the situation first.

upvoted 0 times

...

Art

5 months ago

Okay, let me walk through this step-by-step. I need to evaluate the significance of the relationship and whether it impairs my ability to conduct the audit impartially.

upvoted 0 times

...

Brianne

5 months ago

I think the key here is to maintain independence and objectivity. Disclosing the relative's involvement is important, but I'm not sure if withdrawing is the best course of action.

upvoted 0 times

...

Rodrigo

5 months ago

Hmm, I'm not sure about this one. I'll have to think through the ethical implications and potential risks to the organization's trust in the audit process.

upvoted 0 times

...

Freeman

6 months ago

This seems like a tricky situation. I'll need to carefully review the professional standards and consider the potential conflicts of interest.

upvoted 0 times

...

Chauncey

1 year ago

Ah, the classic 'auditor's relative is a customer' dilemma. I'd go with option D and get out of there faster than a speeding bullet!

upvoted 0 times

Val

1 year ago

I think it's important to maintain independence and avoid any conflicts of interest.

upvoted 0 times

...

Queenie

1 year ago

I agree, option D seems like the safest choice in this situation.

upvoted 0 times

...

Royal

1 year ago

I'd say D is the only option that doesn't smell like a lawsuit waiting to happen. Auditor's relative as a customer? Yikes!

upvoted 0 times

Wilford

12 months ago

D) Immediately withdraw from the audit engagement

upvoted 0 times

...

Desiree

12 months ago

C) Disclose in the engagement final communication that the relative Is a customer

upvoted 0 times

...

Domonique

12 months ago

B) Have the chief audit executive and management determine whether the auditor should continue with the audit engagement.

upvoted 0 times

...

Luz

1 year ago

A) Proceed with the audit engagement, but do not include the relative's information.

upvoted 0 times

...

Laquanda

1 year ago

Hmm, I'd go with C. Might as well be upfront about it and let the chips fall where they may. At least you're being transparent.

upvoted 0 times

Dorthy

12 months ago

D) Immediately withdraw from the audit engagement

upvoted 0 times

...

Tawny

12 months ago

C) Disclose in the engagement final communication that the relative Is a customer

upvoted 0 times

...

Iluminada

1 year ago

B) Have the chief audit executive and management determine whether the auditor should continue with the audit engagement.

upvoted 0 times

...

Hyun

1 year ago

A) Proceed with the audit engagement, but do not include the relative's information.

upvoted 0 times

...

Latrice

1 year ago

I think that's a good idea, let's involve the higher-ups to ensure impartiality.

upvoted 0 times

...

Glory

1 year ago

That's a valid point, maybe we should have the chief audit executive and management decide on the best course of action.

upvoted 0 times

...

Lorriane

1 year ago

But wouldn't that create a conflict of interest for the auditor?

upvoted 0 times

...

Latrice

1 year ago

I agree with Glory, transparency is key in this situation.

upvoted 0 times

...

Reena

1 year ago

B seems like the safest bet. Let the higher-ups figure this one out. I'm not risking my reputation for a relative's loan!

upvoted 0 times

...

Glory

1 year ago

I think we should disclose the information about the relative being a customer.

upvoted 0 times

...

Bettina

1 year ago

Option D is the way to go. No way I'm touching that audit with a 10-foot pole! Conflict of interest is a big no-no.

upvoted 0 times

Zoila

1 year ago

It's definitely a conflict of interest to continue with the audit knowing there's a loan to an auditor's relative. Option D is the right move.

upvoted 0 times

...

Alethea

1 year ago

I think it's better to withdraw from the audit engagement to maintain independence and objectivity.

upvoted 0 times

...

Cordelia

1 year ago

I agree, option D is the best choice. It's important to avoid any conflicts of interest.

upvoted 0 times

...