Exam IIA-CIA-Part1 topic 1 question 39 discussion

Actual exam question from IIA's IIA-CIA-Part1

Question #: 39
Topic #: 1

Senior management at a financial institution has received allegations of fraud at its derivatives trading desk and has asked the internal audit activity to investigate and issue a report concerning the allegations. The internal audit activity has not yet developed sufficient proficiency regarding derivatives trading to conduct a thorough fraud investigation in this area. Which of the following courses of action should the chief audit executive (CAE) take to comply with the Standards?

A. Engage the former head of the institution's derivatives trading desk to perform the investigation and submit a report with supporting documentation to the CAE.
B. Request that senior management allow a delay of the fraud investigation until the internal audit activity's on-staff certified fraud examiner is able to obtain the appropriate training regarding the analysis of derivatives trading.
C. Request that senior management exclude the internal audit activity from the investigation completely and instead contract with an external certified fraud examiner with derivatives experience to perform all aspects of the investigation and subsequent reporting.
D. Contract with an external certified fraud examiner with derivatives experience to perform the investigation and subsequent reporting, with the chief audit

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Suggested Answer: D 🗳️

by anmol009 at Sept. 19, 2021, 9:57 a.m.

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John1237

7 months, 2 weeks ago

The CAE retains the responsibility and the coordination even if the audit engagement is co-sourced or outsourced.

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Magic_Fab

1 year, 2 months ago

Because with C it seems that the auditor is giving orders to Senior Management: look at the verbs used: "Request that senior management..." and "Contract with an external CFE..."

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anmol009

1 year, 3 months ago

If the auditor does not have expertise in the subject matter, he should exclude himself from it, right ? Then why not C ?

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Mikoyan

5 months, 3 weeks ago

I think the determining factor was that management has asked CAE. Now it's CAE's responsibility to ensure that it has the necessary competency to carry out the engagement. In this case, the limiting factor is the expertise in derivative trading; hence including an external expert in the team to solve that part and continuing with the engagement as before.

upvoted 1 times

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