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NEW QUESTION 35
During an audit of financial contracts, an auditor learns that a relative has a substantial loan with the organization. The auditor should:

• A. Exclude the relative's information from the audited work and proceed with the audit engagement.
• B. Notify management and the chief audit executive (CAE) and have the CAE determine whether the auditor should continue with the audit engagement.
• C. Immediately withdraw from the audit engagement.
• D. Proceed with the audit engagement but disclose in the engagement final communication that the relative is a customer.

Answer: B

Explanation:
Section: Volume B

NEW QUESTION 36
A chief audit executive used risk assessment to prepare the audit work schedule. Which of the following would be the least appropriate reason to modify the schedule?

• A. Request for postponement since the audit would be too complicated.
• B. Need for coordination of audit activities with the external auditors.
• C. Budget constraints or expansions.
• D. Change in the relative risk of auditable activities during the year.

Answer: A

NEW QUESTION 37
Which of the following is the most important limitation on the effectiveness of audit committees?

• A. Audit committee members do not normally have degrees in the accounting or auditing fields.
• B. Audit committees may be composed of independent directors; however, those directors may have close personal and professional friendships with management.
• C. Audit committees devote most of their efforts to external audit concerns and do not pay much attention to internal auditing and the overall control environment.
• D. Audit committee members are compensated by the organization and thus favor a stockholder view.

Answer: B

NEW QUESTION 38
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