Question

If an engagement client's operating standards are vague and thus subject to interpretation, what must the internal auditor do?

1) Seek clarification from the client
2) Ignore the vague standards and proceed with the audit
3) Conduct the audit based on their own interpretation
4) Terminate the engagement

Answer 1

The internal auditor must seek clarification from the client when faced with vague operating standards to ensure an objective audit aligned with the client's expectations. The correct answer is option 1).

Step-by-step explanation:

When an internal auditor encounters vague operating standards during an engagement, they must opt for seeking clarification from the client. If operating standards are not clear, the auditor would fail to conduct an objective and reliable audit. Therefore, the appropriate action is to seek clarification from the client.

This dialogue assists in ensuring that the scope of the review is aligned with the client's expectations and that the findings will be relevant and useful for decision making. Ignoring the standards or proceeding based on their own interpretation could lead to misaligned outcomes and potentially, misunderstandings between the internal auditor and the client.

Moreover, it is not within the auditor's professional prerogative to terminate the engagement solely due to vague operating standards. Communication with the client to resolve ambiguities is a fundamental part of the audit process.