Question

After an engagement report with adverse observations has been communicated to appropriate engagement client personnel, internal auditing's proper action is to?

1) assemble new data to support the observations
2) examine further the data supporting the observations
3) schedule a follow-up engagement
4) implement corrective action indicated by the observations

Answer 1

After communicating an engagement report with adverse observations, the correct next step for internal auditing is to schedule a follow-up engagement to assess corrective actions taken.

Step-by-step explanation:

After an engagement report with adverse observations has been communicated to appropriate engagement client personnel, internal auditing's proper action is to schedule a follow-up engagement. Scheduling a follow-up is crucial to verify that the engagement client has taken the corrective actions and to assess the success or efficacy of such actions. A proper follow-up engagement ensures accountability and continuous improvement, which are key outcomes of the internal audit process.

While assembling new data or examining further the data supporting the observations might be necessary in some cases, these actions are usually performed before the report is finalized. After communicating the report, the internal audit function should focus on evaluating the completion and effectiveness of actions taken, rather than revisiting the collected data. Implementation of corrective actions is typically the responsibility of the management of the audited area, rather than the internal audit team.