1.A sales department manager has instituted a new "stick and carrot" strategy that gives away expensive items in conjunction with new product sales (carrot) and bonus reductions to penalize bad performance (stick).

The strategy seems successful, but management believes the risks of employee burnout may be too high and has asked for a review by the internal audit activity. However, the auditors found that employees are in high-spirit as the manager has made arrangements of "scheduled" best and worst performers to motivate employees and promote fairness.

What would be the best course of action for the auditor?

Record the observation and notes that there is the risk of employee burnout are mitigated by the department arrangement.

Collect the audit evidence and interview employees for the performance arrangement.

Report the illicit activities to the Board immediately as such actions may consist of fraud.

Raise the issue to CAE and recommends a fraud investigation on the sales department.

2. During an annual audit at a factory located in a foreign country, Cheryl Eckhardt found several issues in the manufacturing process which caused severe problems in product safety and may cause severe health effects.

For which situation should Cheryl consider communicating this sensitive information outside the organizations governance structure?

Group of answer choices

The internal auditor believes that the problem will not be properly investigated by management.

The internal auditor should establish the internal hotline immediately to process Cheryl's report instead of communicate outside the governance structure.

The internal auditor believes that the problem will not be properly investigated by management.

An outside agency may be able to help the corporation correct the problem faster than the corporation could on its own.

3. Which of the following actions should a chief audit executive most likely take upon discovery of fraudulent financial reporting by a publicly traded company?

The chief audit executive should report the fraudulent financial reporting to the appropriate governmental agency

The chief audit executive may discuss the problem with the management and decide upon a course of action.

The chief audit executive should try to solve the problem before consulting management

The chief audit executive should follow the chain of command discussions on this issue with the Board.