Certified Internal Auditor (CIA) Part 2: Practice of Internal Auditing — Question 276

During an assurance engagement, the internal auditor noticed that the chief financial officer (CFO) solely authorized a transaction to sell carbon credits with a total value of $25 million. Which of the following criteria is most likely to assist the auditor in drawing a conclusion?

Answer options

• A. The CFO's explanation regarding the priority of the transaction.
• B. The essence of the transaction authorized by the CFO.
• C. The conditions of the letter of authorization issued to the CFO.
• D. The internal auditor's professional judgement of the situation.

Correct answer: C

Explanation

The correct answer is C because the conditions outlined in the letter of authorization can provide specific guidelines and limitations on the CFO's authority, which are essential for the auditor's evaluation. The other options, while potentially relevant, do not directly address the formal authority and parameters granted to the CFO regarding the transaction.