Student Forums CIA Part 2: Practice of Internal Auditing Section II: Planning the Engagement 46. Question ID: CIA 596 1.10 (Topic: D. Determine Engagement Procedures and Pre

46. Question ID: CIA 596 1.10 (Topic: D. Determine Engagement Procedures and Pre

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  • #134291

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    This forum is restricted to members of the associated course(s).

    Armindo Comar
    Participant

    Answer I. is wrong???
    Key: Actual versus budget => resulting 1) variance and 2) greater than 10% variance should be followed by explanation and approval.

    Answer I has “over budget explanation and approval.” But, still wrong???

    46. Question ID: CIA 596 1.10 (Topic: D. Determine Engagement Procedures and Prepare Work Program)

    An electric utility company records capital and maintenance expenditures through the use of a computerized project tracking system. Labor, material, and overhead are charged to the applicable project number. Monthly reports are produced which detail individual charges to each project, and expenditure totals are provided for the current month, fiscal year, and project life to date.

    Monthly project reports compare actual costs to original budget estimates and compute variances. Project variations greater than 10 percent of budget require subsequent explanation and approval by the supervisor.

    Which of the following audit test(s) would the internal auditor use to determine whether the required procedure is being followed?
    I. Select a sample of over-budget explanations and test for subsequent approvals.
    II. Trace over-budget explanations to supporting monthly project reports.
    III. Use audit software to recompute monthly project report variances and totals.
    IV. Compare a sample of project variances to documented approvals and explanations.
    A. III and IV.
    B. I, II and III.
    C. IV only.
    D. I and II only.

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  • #134292

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    Brian Hock
    HOCK international

    Armindo,

    The issue is that in those cases of more than 10% over budget, they need to be both approved and explained. Item I only has the explanation. It does not have the approval part of it as well. So, I is not incorrect so much as it is incomplete.

    Brian

    #134348

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    Armindo Comar
    Participant

    Hi Brian,
    I got caught up in the fact that I.) had part of the answer.
    Thank you so much for reaching out with the answer.

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