Learn the most effective approach for an internal auditor to gain a thorough understanding of key risks and related controls when assessing electricity sales contracts with business clients. Boost your knowledge for the IIA-CIA-Part2 certification exam with this expert-written explanation.
Table of Contents
Question
A new internal auditor is assigned to assess key risks of electricity sales to business clients and wants to gain an understanding of the business. Which of the following is likely to yield the best understanding of significant risks and related controls?
A. A review of the mission statement and long-term strategy of the company.
B. A set of interviews with a sample of the business clients.
C. An analysis of a sample of electricity contracts concluded with business customers.
D. An interview with the manager who is responsible for electricity sales.
Answer
C. An analysis of a sample of electricity contracts concluded with business customers.
Explanation
When a new internal auditor is tasked with assessing the key risks associated with electricity sales to business clients, the best approach to gain a comprehensive understanding of significant risks and related controls is to analyze a sample of actual electricity contracts concluded with business customers (Option C).
Reviewing the contracts themselves will provide direct insight into the specific terms, conditions, pricing structures, and other key elements that could pose risks or require controls. The contracts represent the core of the business relationship and transactions between the company and its business electricity customers.
While reviewing the company’s mission and strategy (Option A) provides high-level context, it is unlikely to yield a detailed understanding of on-the-ground risks and controls. Interviewing a sample of business clients (Option B) could provide some useful external perspectives, but may not give the complete internal picture. And although interviewing the sales manager (Option D) would offer some relevant information, relying on a single source is not as comprehensive as reviewing a sample of actual contracts.
Therefore, analyzing a sample of electricity contracts (Option C) would yield the most thorough and multifaceted understanding of the significant risks and related controls for the internal auditor’s assessment.
IIA-CIA-Part2 certification exam assessment practice question and answer (Q&A) dump including multiple choice questions (MCQ) and objective type questions, with detail explanation and reference available free, helpful to pass the IIA-CIA-Part2 exam and earn IIA-CIA-Part2 certification.