32) One of the following conditions noted in the course of performing an indepen

Question

32) One of the following conditions noted in the course of performing an independent audit should cause a prudent independent auditor to suspect that company employees might face higher than normal temptations to engage in thefts and misappropriations of corporate assets:

A) The company offers all of its employees generous fringe benefits.

B) The turnover in the Head Auditor position of the company’s internal audit function is extremely low when compared to the turnovers experienced in other industries.

C) The company internal audit reports frequently point out deficiencies in the company’s internal control policies and processes that are never remedied by top management or the Board of Directors.

D) The company’s internal audit function reports directly to the audit committee of the Board of Directors.

Explanation / Answer

C) The company internal audit reports frequently point out deficiencies in the company’s internal control policies and processes that are never remedied by top management or the Board of Directors.

Since if the top mgt never take deficiencies seriosly employees would be motivated to indulge in wrong practises as they are aware that there are less controls and mgt is not strict enough.

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