Question

When conducting a consulting engagement to improve the efficiency of a production process, the internal audit team is faced with a scope limitation because several months of the production data has been lost or is incomplete. Faced with this scope limitation, the CAE should:

a. Halt the consulting engagement and conduct a separate assurance
engagement to determine why the data was not available.
b. Discuss the problem with the customer and together evaluate whether the
engagement should be continued.
c. Complete the analysis without the data but include a scope limitation in the
engagement report.
d. Report the scope limitation to the independent outside auditors.

Answer 1

The Chief Audit Executive should discuss the scope limitation with the customer and decide together on whether to proceed with the consulting engagement. If continued, the limitation should be noted in the engagement report.

Step-by-step explanation:

When an internal audit team faces a scope limitation due to the loss or incompleteness of several months of production data during a consulting engagement, the Chief Audit Executive (CAE) should discuss the problem with the customer and evaluate whether the engagement should be continued. This is particularly important because the integrity of the analysis is compromised without the complete data set, which could lead to an ineffective assessment of the production process's efficiency. If the decision is to proceed, the CAE should acknowledge the scope limitation in the engagement report to ensure that stakeholders are aware of the data gaps when interpreting the findings.