Session 3 IAP

A chief audit executive has reviewed credentials, checked references, and interviewed a candidate for a staff position. The CAE concludes that the candidate has a thorough understanding of internal audit techniques, accounting, and finance. However, the candidate has limited knowledge of economics and information technology. Which action is most appropriate?

• Offer the candidate a position despite lack of knowledge in certain essential areas.

• Reject the candidate because of the lack of knowledge required by the Standards.

• Offer the candidate a position if other staff members possess sufficient knowledge in economics and information technology.

• Encourage the candidate to obtain additional training in economics and information technology and then reapply.

The chief audit executive (CAE) must ensure that the internal audit activity (IAA) can fulfill its responsibilities. Thus, the CAE identifies the IAA’s human resources (knowledge, skills, and other competencies). To understand the background of the staff, the essential practices involve

• Use of databases.

• Skills assessment.

• Performance appraisal.

• Hiring.

A small internal audit activity (IAA) is performing an assurance engagement but lacks the expertise to evaluate certain accounting estimates. Thus, the chief audit executive (CAE) must obtain the necessary knowledge, skills, and other competencies from an external service provider (ESP). The fundamental reason for this decision most likely is that

• The quality assurance and improvement program (QAIP) failed to report the IAA’s lack of expertise.

• The CAE did not hire sufficiently qualified staff.

• Each member of the IAA is not required to be qualified in all disciplines.

• The ESP did not assume the role of CAE.

The internal audit activity collectively must possess or obtain certain competency in

• Management principles.

• Marketing.

• Contract law.

• Information technology controls.

When the internal audit activity (IAA) outsources some of its functions to an external service provider (ESP),

• The IIA’s Standards must be followed by the ESP.

• Oversight of the IAA may be outsourced.

• An ESP associated with the client is appropriate if the relevant guidance is followed.

• Responsibility for the IAA may be outsourced.

Given that internal audit engagements must be performed with proficiency and due professional care, which of the following is true?

• The internal audit activity need not decline an engagement because it lacks the needed competencies.

• All internal auditors must be proficient in all necessary competencies.

• An internal auditor should have the expertise of a specialist in IT auditing.

• An internal auditor should have the expertise of a specialist in fraud detection.

The internal audit activity is considering hiring a person who has a thorough understanding of internal auditing techniques, accounting, and principles of management but has nonspecialized knowledge of economics and information technology. Hiring the person is most appropriate if

• The prospective employee could reasonably be expected to gain sufficient knowledge of these competencies in the long run.

• A mentor is assigned to ensure completion of an individually designed professional development program.

• Other internal auditors possess sufficient knowledge of economics and information technology.

• A professional development program is agreed to in advance of actual hiring.

An internal auditor’s objectivity could be compromised in all of the following situations except

• The internal auditor’s assumption of operational duties on a temporary basis.

• Reliance on an outside service provider when appropriate.

• An engagement client’s familiarity with the internal auditor due to lack of rotation in assignments.

• A conflict of interest.

Use of external service providers with expertise in healthcare benefits is appropriate when the internal audit activity is

• Training its staff to conduct an audit of healthcare costs in a major division of the organization.

• Comparing the cost of the organization’s healthcare program with other programs offered in the industry.

• Evaluating the organization’s estimate of its liability for postretirement benefits, which include healthcare benefits.

• All of the answers are correct.

The internal audit activity collectively must possess or obtain certain competencies, excluding

• The ability to assess relevant basic macroeconomic factors.

• Knowledge of cost accounting concepts.

• Knowledge of the IPPF.

• The ability to conduct training sessions in quantitative methods.