Question

The internal auditors of a financial institution are performing an engagement to evaluate the institution's investing and lending activities. During the last year, the institution has adopted new policies and procedures for monitoring investments and the loan portfolio. The internal auditors know that the organization has invested in new types of financial instruments during the year and is heavily involved in the use of financial derivatives to appropriately hedge risks. If the internal auditors were to conduct a preliminary review, which of the following procedures should be performed?

1) Review reports of engagements performed by regulatory and external auditors since the last internal audit engagement.
2) Interview management to identify changes made in policies regarding investments or loans.
3) Review minutes of board meetings to identify changes in policies affecting investments and loans.
4) All of the answers are correct.

Answer 1

If the internal auditors were to conduct a preliminary review of the financial institution's investing and lending activities, they should review reports of engagements performed by regulatory and external auditors, interview management, and review minutes of board meetings.

Step-by-step explanation:

If the internal auditors were to conduct a preliminary review of the financial institution's investing and lending activities, they should perform the following procedures:

1. Review reports of engagements performed by regulatory and external auditors since the last internal audit engagement. This will provide insights into any issues or areas of concern identified by these auditors.
2. Interview management to identify any changes made in policies regarding investments or loans. This will help the auditors understand the impact of the new policies and procedures.
3. Review minutes of board meetings to identify any changes in policies affecting investments and loans. This will provide information on any decisions made by the board that may impact the institution's investing and lending activities.

Therefore, the correct answer is option 4) All of the answers are correct.