Discover the crucial action internal auditors must take after considering fraud scenarios and prioritizing risks. Learn best practices for fraud risk management in internal auditing.
Table of Contents
Question
According to IIA guidance, which of the following actions should the internal auditor take immediately after having considered fraud scenarios and identified and prioritized fraud risks?
A. Determine which controls, if any, are in place to mitigate the fraud risks.
B. Follow established protocols for internal reporting and investigating fraud allegations.
C. Research frauds that have occurred in similar organizations.
D. Incorporate the fraud risk assessment into the engagement plan.
Answer
According to IIA guidance, the correct answer is A. Determine which controls, if any, are in place to mitigate the fraud risks.
Explanation
This is the most appropriate immediate action for an internal auditor to take after considering fraud scenarios and identifying and prioritizing fraud risks. Here’s a detailed explanation of why this is the correct choice and why the other options are not as suitable:
Determining existing controls (Option A):
After identifying and prioritizing fraud risks, it’s crucial to assess the current control environment. This step helps the auditor understand what measures are already in place to address the identified risks. By evaluating existing controls, the auditor can:
- Identify gaps in the control framework
- Assess the effectiveness of current controls
- Determine if additional controls are needed
- Provide a foundation for recommending improvements
Why the other options are less appropriate:
B. Follow established protocols for internal reporting and investigating fraud allegations:
This action is premature at this stage. Reporting and investigating fraud allegations would only be necessary if actual fraud was detected or strongly suspected. The question describes a scenario where risks have been identified, but not necessarily any concrete fraud instances.
C. Research frauds that have occurred in similar organizations:
While this can be a useful step in the overall fraud risk assessment process, it typically occurs earlier, during the initial consideration of fraud scenarios. At this point, risks have already been identified and prioritized, so additional research is less critical than assessing existing controls.
D. Incorporate the fraud risk assessment into the engagement plan:
This is an important step, but it should occur after determining existing controls. The engagement plan should include not only the identified risks but also an evaluation of the control environment and any recommendations for improvement.
In conclusion, determining existing controls is the most logical and effective next step after identifying and prioritizing fraud risks. This action provides a comprehensive understanding of the current risk mitigation efforts and forms the basis for further analysis and recommendations in the internal audit process.
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.