Which of the following is the internal auditor’s most appropriate next step?

Evidence discovered during the course of an engagement suggests that multiple incidents of fraud have occurred. There do not appear to be sufficient controls in place to prevent reoccurrence.

Which of the following is the internal auditor’s most appropriate next step?
A . Immediately notify management of the area under review and the other internal auditors involved in the engagement.
B . Discuss the situation with the engagement supervisor to determine whether fraud investigation experts are required to investigate the matter properly.
C . Fully document in the workpapers the evidence that has been discovered and recommend appropriate controls to address the fraud.
D . Provide the evidence that was discovered to local law enforcement for possible prosecution of the suspected fraud.

View Answer

Answer: B

Explanation:

When evidence of multiple incidents of fraud is discovered and there are insufficient controls in place, the internal auditor’s most appropriate next step is to discuss the situation with the engagement supervisor to determine whether fraud investigation experts are needed. This step ensures that specialized expertise is considered and engaged if necessary to properly investigate the matter and to determine the appropriate response, including the potential involvement of law enforcement.

Reference: International Standards for the Professional Practice of Internal Auditing on responding to findings and incidents of fraud; guidance on fraud investigation.