C. The challenges faced by the company can also create a temptation for employees to act unethically. The code of conduct is also not updated to face the current challenges, which can create an opportunity for employees to violate the code. Moreover, not all the employees have the ethical training they should have. This situation might force the managers and employees at the business level process to manipulate results, targets and objectives so as to keep their jobs in hand. D. 1. Due to the increased challenges faced by the company and outdated Code of conduct, internal auditors might increase their level of professional skepticism and will perform the engagement more carefully so as
to gather reliable and adequate evidence to support their conclusions. The internal auditors might add more engagement procedures, interviews and questionnaires to make sure that internal controls and ethical conduct is being followed. 2. Inherent risk at the process level means a probability of risk existing due to inadequate process level controls. This risk can occur due to uncontrollable factors and might not be caught in audit. Due to this, internal auditors should be more cautious while assessing inherent risks at the process level. Internal auditors might rely more on deep engagements, testing and procedures in order to gather sufficient evidence to support their conclusion. 3. The approach to evaluate the design adequacy of process-level controls depends on the assessment of inherent risks at the process level. If the internal auditor concludes that the inherent risk is low, then the design of process- level controls should be established while considering the low level of inherent risks. If the internal auditor concludes that inherent risks are high at process level, them the design of process- level controls should be more aggressive and should include detailed procedures, increased sampling, surveys, questionnaires and interviews. 4. The inclination to perform direct tests of transactions in search of indirect evidence to support the conclusion depends on the assessment of entity level controls by the internal auditors. If the internal auditors assess that the entity level controls are inadequate to maintain operating effectiveness, it will trigger increased direct testing of transactions. Increased direct testing will determine the source and cause of errors which can be resolved by designing adequate and effective process level controls. If there are no errors found in testing, it means that the entity level controls are already adequate to maintain operating effectiveness.
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- Spring '16
- internal auditor