[miss z MAMA]

NINJA Question –

Hi Ninjas! I’m confused about an MCQ in ninja audit test bank.

The company being audited has an internal auditor that is both competent and objective. The independent auditor wants to assign tasks for the internal auditor to perform. Under these circumstances, the independent auditor may:

A. allow the internal auditor to perform tests of internal controls.
B. allow the internal auditor to audit a major subsidiary of the company.
C. not assign any task to the internal auditor because of the internal auditor’s lack of independence.
D. allow the internal auditor to perform analytical procedures, but not be involved with any tests of details.

I answered D. The correct answer is A.

I don’t understand why A can be right. How can we let internal auditors audit their own work?

Thanks very much

[M123]

A. allow the internal auditor to perform tests of internal controls.
==> May not require use of judgment (as compared to say a complex estimate) and seems ok if objective.

B. allow the internal auditor to audit a major subsidiary of the company.
==> No – This would require significant judgment and trust.

C. not assign any task to the internal auditor because of the internal auditor’s lack of independence.
==> No – some input from internal are allowed.

D. allow the internal auditor to perform analytical procedures, but not be involved with any tests of details.
==> This seems plausible but the principle here I think is that if an auditor uses an internal auditor they effectively treat that individual as staff, and as such would supervise. So I don't see why the latter would be disallowed.

So A does seem most appropriate.

Haven't passed Aud yet so grain of salt. Will be looking at answers.

[Anonymous]

This is an awkwardly worded question.

the independent auditor may:

A. allow the internal auditor to perform tests of internal controls.
That is true, the independent auditor may allow internal audit to test internal controls. There's no rule that says this is off-limits.
This is not internal audit auditing their own work. Management establishes internal controls and internal audit tests them to make sure they are working properly. Then Management reads the results and decides if anything needs to be changed or if other actions should be taken. In the real world, we (external auditors) often ask to see internal audit's reports so that we don't have to reinvent the wheel and test a bunch of controls that they have already tested. It also helps to gain an understanding of their internal controls and monitoring procedures. If we see that a certain area never gets tested or it keeps failing internal audit testing throughout the year, we might increase the risk in that area and plan to do more testing in that area for our own audit.

B. allow the internal auditor to audit a major subsidiary of the company.
No, the auditor may NOT outsource major portions of the audit.

C. not assign any task to the internal auditor because of the internal auditor’s lack of independence.
No, the auditor MAY assign tasks to internal audit. This is wrong because of the “not”.

D. allow the internal auditor to perform analytical procedures, but not be involved with any tests of details.
No, the auditor MAY allow internal audit to be involved in tests of details. This is wrong because of the “not”. There is no rule that says internal audit cannot do tests of details as long as its properly supervised. Its weird because of the wording and the double negative.

[miss z MAMA]

thx for your replies!

[sulaiman]

Well even if A isn't a great answer, you can see the other three options are even much worse so that would make it easier to answer such a question. Your choice -D- cannot be true because there's no limitation on internal auditor to not perform test of details. Watch out in audit for such extreme words ( any – all …etc)

[Author]

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