Question

An airline is preparing for an inspection of its operations by a government agency. The agency emphasizes inspecting whether safety modifications required by the government have been made on aircraft. Penalties for violations are severe. The chief audit executive has been asked to audit the modification records and inspect the fleet of aircraft to determine whether required modifications have been made and properly documented. The auditors will be performing a(n)

A. Operational audit.
B. Compliance audit.
C. Due diligence audit.
D. Financial audit.

Answer 1

The chief audit executive is tasked with performing a Compliance audit, which is designed to ensure adherence to government safety modifications and proper documentation within the airline industry. The correct option is B.

Step-by-step explanation:

The student's question revolves around identifying the type of audit that the chief audit executive has been asked to conduct for an airline preparing for a government agency inspection, particularly concerning safety modifications on aircraft.

The audit will involve reviewing modification records and inspecting the fleet to verify compliance with government safety requirements. Based on the description provided, the auditors will be performing a Compliance audit. This type of audit is done to ensure that the organization is following laws, regulations, and policies that are applicable to its operations.

Unlike an Operational audit that evaluates operational efficiency, a Due diligence audit that assesses a business before a transaction, or a Financial audit that checks the accuracy of financial statements, a Compliance audit specifically checks adherence to external standards and requirements.