The internal audit activity is planning an assurance engagement for a foreign subsidiary. According to IIA guidance, which of the following would be included in the preliminary communication to management of the area under review?
A.
The scope of the engagement, the estimated time frame, and the names of the auditors.
B.
The estimated time frame, the names of the auditors, and the resources and travel budget.
C.
The names of the auditors, the resources and travel budget, and the scope of the engagement.
D.
The resources and travel budget, the scope of the engagement, and the estimated time frame.
When planning an assurance engagement, especially for a foreign subsidiary, it is essential to communicate effectively with management to ensure transparency and set expectations. According to IIA guidance, the preliminary communication should include critical information that helps the management of the area under review understand the purpose, scope, and logistics of the audit.
IIA Standard 2201 – Planning Considerations:
This standard emphasizes that the internal auditor should plan the engagement to achieve the engagement objectives effectively. It includes discussing the scope, objectives, timing, and resource allocations with management.
Key Elements to Include in Preliminary Communication:
Scope of the Engagement: Clearly defining what the audit will cover ensures that both the auditors and the management understand the boundaries and focus areas of the audit.
Estimated Time Frame: Providing a timeline helps management plan their activities and ensures that the audit process does not interfere with critical operations.
Names of the Auditors: Identifying the audit team helps in establishing a working relationship and allows management to know who will be conducting the audit.
IIA Practice Advisory 2201-1:
This advisory suggests that early communication of the scope, timing, and staffing helps in gaining the management’s cooperation and sets the stage for a successful audit.
Option B and D (Including resources and travel budget): These details are more administrative and do not need to be included in the preliminary communication to management.
Option C (Resources, budget, and scope): While scope is important, resources and budget are internal matters and not essential in preliminary communication with management.
Detailed Explanation:Why Not Other Options?Conclusion: Option A is correct as it ensures that the management is informed about the key aspects of the audit that directly impact them, aligning with IIA’s standards for audit planning and communication.
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