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Question 32: CIA II Practice Exam

Question 32:

  1. The auditor of a construction company that builds foundations for bridges and large buildings performs a review of the expense accounts for augers, which are used to drill holes in rocks to set the foundation for the buildings. During the review, the auditor notes that the expenses related to some of the auger accounts increased dramatically during the year. The auditor asks the construction manager about this, and the manager offers the explanation that the augers last two to three years and are expensed when purchased. Thus, the auditor should see a decrease in the expense accounts for these augers in the next year but an increase in the expenses of other augers. The auditor also finds out that the construction manager is responsible for the inventorying and receiving of the augers and is a part owner of a company that supplies augers to the company. The supplier was approved by the president of the company to improve the quality of equipment. Assume that the auditor did not find a satisfactory explanation for the results of the analytical procedures performed and has conducted the appropriate follow-up procedures. The audit of the area is otherwise complete. Which of the following would be the mostappropriate action to take?








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