Final answer:
The initial responsibility of an internal auditor discovering errors during an audit is to assess the risk of misrepresentation. The auditor must determine the materiality of the errors before reporting to the audit committee or discussing with the engagement client. Bureaucracies might resist internal criticism, posing a challenge to the auditor's professional integrity.
Step-by-step explanation:
The initial responsibility of an internal auditor who uncovers errors during a financial statement audit is C. Assess the risk of misrepresentation. Before any steps to report the errors are taken, it is crucial for the internal auditor to determine the significance of the errors in the context of the entire financial statements. If the error is material and could affect the stakeholders' understanding of the financial health of the organization, further actions must be considered, such as informing the audit committee or discussing the situation with the engagement client. Any material errors should ultimately be reported to the appropriate parties such as the audit committee or regulatory bodies, but the first step is always to assess the risk that the error imposes on the financial statements.
An internal auditor must navigate the delicate balance of maintaining professional integrity while potentially facing resistance from within the bureaucracy. This is because bureaucracies often protect their reputations and might be resistant to internal criticism. Therefore, an auditor must carefully consider the implications of their findings and ensure they adhere to their professional responsibilities in reporting any significant issues.