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Exam IIA-CIA-Part2 topic 3 question 10 discussion

Actual exam question from IIA's IIA-CIA-Part2
Question #: 10
Topic #: 3
[All IIA-CIA-Part2 Questions]

Persuasive evidence indicates that a member of senior management has been involved in insider trading that would be considered fraudulent. However, the evidence was encountered during an operational audit and is not considered relevant to the audit. Which of the following is the most appropriate action for the chief audit executive to take?

  • A. Report the evidence to external legal counsel for investigation. Report the legal counsel findings to management.
  • B. Report the evidence to the chairperson of the audit committee and recommend an investigation.
  • C. Conduct sufficient audit work to conclude whether fraudulent activity has taken place, then report the findings to the chairperson of the audit committee and to government officials if appropriate action is not taken.
  • D. Discontinue audit work associated with the insider trading since it is not relevant to the existing audit.
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Suggested Answer: B 🗳️
by KonradK at Sept. 19, 2021, 8:52 a.m.

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balqis32
4 months ago
evidence has been established (keyword: PERSUASIVE EVIDENCE), hence no further audit work is required. Need to report to BOD. For fraud cases, avoid select answer with reporting to external parties.
upvoted 2 times
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KonradK
2 years, 4 months ago
Can someone explain why B?
upvoted 1 times
John1237
1 year, 11 months ago
This is a fraud case and the governing bodies must be promptly informed. If senior management is involved, the person left to be informed is the Board (Audit Committee).
upvoted 1 times
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asdfghjk2020
2 years, 4 months ago
Answer A and C requires to report external and this is consider a violation , and D if the CAE didn't disclose the issue to the proper side according to the Org policy or command, it will be a violation of objectivity. The best choice B.
upvoted 1 times
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