Explore the accountability for audit conclusions when external service providers are involved. Learn about the CAE’s role in ensuring supported findings in specialized audits.
Table of Contents
Question
The chief audit executive (CAE) for a manufacturing company included in this year’s audit plan a review of the company’s laboratory, using an experienced external service provider. The audit plan was approved by the audit committee without any changes. At the time of engaging the external service provider, the CAE also secured the approval from the CEO. Who is responsible for ensuring that the conclusions reached for this exercise are adequately supported?
A. Audit committee.
B. СEO.
C. CAE.
D. External service provider.
Answer
C. CAE (Chief Audit Executive)
Explanation
The Chief Audit Executive (CAE) is ultimately responsible for ensuring that the conclusions reached in any audit exercise, including those performed by external service providers, are adequately supported. This responsibility stems from several key principles of internal auditing:
- Oversight: The CAE is responsible for overseeing all internal audit activities, regardless of whether they are performed in-house or by external providers.
- Quality Assurance: The CAE must ensure that all audit work meets the organization’s quality standards and professional internal auditing standards.
- Reporting: The CAE is accountable for reporting audit results to senior management and the audit committee.
- Independence: While the CAE secured approval from the CEO for engaging the external service provider, this does not transfer responsibility for the audit conclusions.
- Professional Standards: According to the Institute of Internal Auditors (IIA) standards, the CAE retains overall responsibility for the internal audit function, including work performed by external service providers.
While other parties have important roles:
- The audit committee approves the audit plan and oversees the internal audit function.
- The CEO provides organizational support and authority.
- The external service provider performs the actual audit work.
None of these parties bears the ultimate responsibility for ensuring the adequacy of audit conclusions. That responsibility lies squarely with the CAE.
It’s worth noting that the CAE should have processes in place to review and assess the work of external service providers to ensure it meets the required standards and that conclusions are indeed adequately supported before they are reported to stakeholders.
This question highlights the importance of understanding roles and responsibilities in internal auditing, particularly when external resources are utilized. It’s a crucial concept for those preparing for the IIA-CIA-Part2 certification exam and for practicing internal audit professionals.
IIA-CIA-Part2 certification exam practice question and answer (Q&A) dump with detail explanation and reference available free, helpful to pass the IIA-CIA-Part2 exam and earn IIA-CIA-Part2 certification.