1.Becky Martin is an internal auditor currently conducting a review of account payable processes in the accounting department. During the audit, Becky found that several the processes involving account receivable such as credit and discount approval can be further improved. In addition, the accounting department managers are welcome to suggestions for change.

What would be Becky's best course of action?

Assist in the implementation of the improvements, as it does not affect audit independence.

Communicate the observations to CAE and recommends a consulting engagement if there are no significant risks to audit independence.

Ignore the issue, as these issues are outside of the audit scope.

Communicate the observation in the audit report and recommend post-audit follow-up activities to check on the results.

2. Orangatronics has been expanding rapidly and is considering adding a new product line. Employees are currently working double shifts and receiving large amounts of overtime pay. Demand for products is currently high, but management worries about seasonal fluctuations in the economy and technological developments by competitors.

Management is concerned with such issues as whether it is efficiently using its resources, whether it is expanding too rapidly or not rapidly enough, whether employee morale is decreasing, and whether future expansion should be financed internally or through debt. Of the following management requests, which is within the normal scope of work of the internal audit activity as stated in the Standards?

Talk with banks to identify financing alternatives and negotiate contract alternatives that will be presented to management for evaluation.

Analyze financing alternatives and present the alternatives to the audit committee.

Perform an independent evaluation of managements planning process as a basis for making recommendations.

Undertake a make-or-buy decision analysis to determine whether the organization should subcontract for part of its manufacturing versus adding capacity. Report the recommendation to management for approval.

3. Matt B manages the internal audit function in an online gambling company. The company has been growing very rapidly due to changes in regulations. Matt is noticing that the department is significantly short-staffed to handle all the audit requests from the Board. To improve audit efficiency, Matt may rely upon the work of external auditors if it is:

Conducted in accordance with the Code of Ethics and organizational audit charter.

Matt should not coordinate with external auditors as it will damage the audit independence of the external auditors.

Approved by the audit committee and coordinated with internal auditing work.

Work with external auditors if primarily concerned with operational objectives and activities

4. During a scheduled annual operation audit engagement, Seth Meyer, an internal auditor, observed a large number of above-ground storage containers filled with electronic wastes and broken parts. The organization has an environmental safety department. The engagement is not designed to consider environmental concerns. The best course of action is to:

Inquire of local management as to the use of the storage tanks to determine if they are properly classified as an asset. Do not take action on the environmental issues because the internal auditor is untrained in the area, and such action is the responsibility of an already existing department.

Inquire of local management as to the use of the storage tanks to determine if they are properly classified as an asset. Do not take action on the environmental issues because the internal auditor is untrained in the area, and such action is the responsibility of an already existing department.

Document the observations and report them to the environmental safety department. Determine if their response will be timely, and follow-up to determine if they have taken timely action.

Inquire of local management as to the use of the storage tanks to determine if they are properly classified as an asset. Do not take action on the environmental issues because the internal auditor is untrained in the area, and such action is the responsibility of an already existing department.