IIA Exam IIA-CIA-Part2 Topic 8 Question 96 Discussion

Actual exam question for IIA's IIA-CIA-Part2 exam

Question #: 96
Topic #: 8

While reviewing the organization's financial year-end processes, an internal auditor discovered an erroneous journal entry. If the error is not addressed, it will result in a material misstatement of the financial records. The internal auditor needs an additional four weeks to complete the audit engagement. How should the auditor communicate this finding?

AThe auditor should issue an interim report to management prior to completion of the audit and issuance of the final report.

BThe auditor should include this item in the final audit report, marked with an asterisk, indicating that it is a high-risk item.

CThe auditor should discuss the finding with the appropriate accounting staff who can make the correction immediately, and if corrected before the engagement is concluded, the finding would not need to be included in the audit report.

DThe auditor is obligated to bypass management and immediately report the error directly to regulatory authorities.

Show Suggested Answer

Suggested Answer: C

The correct approach aligns with the International Standards for the Professional Practice of Internal Auditing (Standards), particularly Standard 2400: Communicating Results. The auditor must promptly discuss material errors to prevent ongoing misstatements. Immediate correction ensures timely remediation and reduces the risk of material misstatement persisting in the financial records. Additionally, if the error is resolved before the engagement concludes, it may not necessitate inclusion in the final report, as per the guidance on handling material findings (Practice Advisory 2410-1). This approach also demonstrates collaboration and alignment with management, fostering trust.

by Alita at Jan 24, 2025, 01:07 AM

Limited Time Offer

25%

Off

Get Premium IIA-CIA-Part2 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Katina

5 days ago

In that case, the auditor should report directly to regulatory authorities.

upvoted 0 times

...

Chara

11 days ago

But what if management tries to cover up the error?

upvoted 0 times

...

30 days ago

Definitely go with option C. It's the most practical solution - work with the accounting staff to fix the issue right away, and no need to include it in the final report if it's resolved. Saves everyone a headache.

upvoted 0 times

...