Final answer:
The correct answer is D. All of the answers, as the audit by the internal auditor should cover all aspects related to monitoring governmental investigations, estimating cleanup costs, and identifying responsible situations for toxic waste site cleanups.
Step-by-step explanation:
The question pertains to the role of an internal auditor in reviewing an organization's processes for developing accruals for liabilities related to cleaning up toxic waste sites. Specifically, the auditor should determine whether:
- The organization monitors governmental investigations to identify locations where it may be potentially responsible for a waste site clean up.
- Cleanup costs are reasonably estimated.
- The organization has identified the situations in which it is potentially responsible for cleaning up a waste site.
All these aspects are integral to ensuring that the organization is both fiscally responsible and compliant with environmental regulations. The audit should thus cover all three areas, making D. All of the answers correct.
When evaluating clean-up costs and processes, marginal analysis is a critical tool. It assesses if the marginal costs of clean-up are greater than the marginal benefit, which would then indicate that those resources could be used more efficiently elsewhere. This is in line with the principles underlying the Superfund program, which is the federal government's initiative to clean up hazardous waste sites.