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IIA-CHAL-QISA Exam - Topic 3 Question 21 Discussion

While auditing an organization's credit approval process, an internal auditor learns that the organization has made a large loan to another auditors relative. Which course of action should the auditor take?
B) Have the chief audit executive and management determine whether the auditor should continue with the audit engagement.
A) Proceed with the audit engagement, but do not include the relative's information.
C) Disclose in the engagement final communication that the relative Is a customer
D) Immediately withdraw from the audit engagement

IIA-CHAL-QISA Exam - Topic 3 Question 21 Discussion

Actual exam question for IIA's IIA-CHAL-QISA exam
Question #: 21
Topic #: 3
[All IIA-CHAL-QISA Questions]

While auditing an organization's credit approval process, an internal auditor learns that the organization has made a large loan to another auditors relative. Which course of action should the auditor take?

Show Suggested Answer Hide Answer
Suggested Answer: B

Identify the Conflict of Interest: The internal auditor learns about a large loan made to another auditor's relative, which represents a conflict of interest.

Refer to Professional Standards: According to the Institute of Internal Auditors' (IIA) standards, an internal auditor must maintain objectivity and avoid conflicts of interest (IIA Standard 1100 -- Independence and Objectivity).

Escalate the Issue: The appropriate course of action is to escalate this matter to the chief audit executive (CAE) and management, as they are responsible for determining the impact of the conflict and the appropriate response.

Decision Making: The CAE and management will assess whether the conflict of interest could impair the auditor's objectivity and decide whether the auditor should be removed from the engagement or if additional oversight is needed.

Documentation: It is important to document the conflict and the decision-making process in the audit documentation for transparency and accountability.


The IIA's International Standards for the Professional Practice of Internal Auditing, specifically Standard 1100 on Independence and Objectivity.

by Royal at Jan 22, 2025, 05:48 AM

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Dulce
10 months ago
Not sure about B, feels like a conflict of interest.
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Blair
10 months ago
C seems right, transparency is key here!
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Dean
10 months ago
Wait, is it really okay to loan to a relative?
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Cassie
11 months ago
I think D is too extreme, just disclose it.
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Sabine
11 months ago
Definitely B, management needs to weigh in on this.
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Angelica
11 months ago
I’m leaning towards option D, but I’m not completely sure if withdrawing is always necessary in these cases.
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Lai
11 months ago
I think I read a case study where the auditor had to disclose similar situations, so maybe option C could be the right choice here?
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Luis
11 months ago
I’m a bit unsure, but I feel like option B makes sense since it involves consulting with higher management about the conflict.
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Sina
12 months ago
I remember discussing conflicts of interest in class, and I think the auditor should definitely not proceed without addressing the situation first.
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Art
12 months ago
Okay, let me walk through this step-by-step. I need to evaluate the significance of the relationship and whether it impairs my ability to conduct the audit impartially.
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Brianne
12 months ago
I think the key here is to maintain independence and objectivity. Disclosing the relative's involvement is important, but I'm not sure if withdrawing is the best course of action.
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Rodrigo
12 months ago
Hmm, I'm not sure about this one. I'll have to think through the ethical implications and potential risks to the organization's trust in the audit process.
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Freeman
12 months ago
This seems like a tricky situation. I'll need to carefully review the professional standards and consider the potential conflicts of interest.
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Chauncey
2 years ago
Ah, the classic 'auditor's relative is a customer' dilemma. I'd go with option D and get out of there faster than a speeding bullet!
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Val
2 years ago
I think it's important to maintain independence and avoid any conflicts of interest.
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Queenie
2 years ago
I agree, option D seems like the safest choice in this situation.
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Royal
2 years ago
I'd say D is the only option that doesn't smell like a lawsuit waiting to happen. Auditor's relative as a customer? Yikes!
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Wilford
1 year ago
D) Immediately withdraw from the audit engagement
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Desiree
1 year ago
C) Disclose in the engagement final communication that the relative Is a customer
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Domonique
2 years ago
B) Have the chief audit executive and management determine whether the auditor should continue with the audit engagement.
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Luz
2 years ago
A) Proceed with the audit engagement, but do not include the relative's information.
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Laquanda
2 years ago
Hmm, I'd go with C. Might as well be upfront about it and let the chips fall where they may. At least you're being transparent.
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Dorthy
1 year ago
D) Immediately withdraw from the audit engagement
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Tawny
1 year ago
C) Disclose in the engagement final communication that the relative Is a customer
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Iluminada
2 years ago
B) Have the chief audit executive and management determine whether the auditor should continue with the audit engagement.
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Hyun
2 years ago
A) Proceed with the audit engagement, but do not include the relative's information.
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Latrice
2 years ago
I think that's a good idea, let's involve the higher-ups to ensure impartiality.
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Glory
2 years ago
That's a valid point, maybe we should have the chief audit executive and management decide on the best course of action.
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Lorriane
2 years ago
But wouldn't that create a conflict of interest for the auditor?
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Latrice
2 years ago
I agree with Glory, transparency is key in this situation.
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Reena
2 years ago
B seems like the safest bet. Let the higher-ups figure this one out. I'm not risking my reputation for a relative's loan!
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Glory
2 years ago
I think we should disclose the information about the relative being a customer.
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Bettina
2 years ago
Option D is the way to go. No way I'm touching that audit with a 10-foot pole! Conflict of interest is a big no-no.
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Zoila
2 years ago
It's definitely a conflict of interest to continue with the audit knowing there's a loan to an auditor's relative. Option D is the right move.
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Alethea
2 years ago
I think it's better to withdraw from the audit engagement to maintain independence and objectivity.
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Cordelia
2 years ago
I agree, option D is the best choice. It's important to avoid any conflicts of interest.
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