Certified Internal Auditor (CIA) Part 2: Practice of Internal Auditing — Question 51

A major insurance company provides a discount on automobile insurance if the vehicle meets certain safety criteria. Which of the following audit tests would provide an internal auditor with the best evidence that all qualifying insured automobiles are receiving the discount?

Answer options

• A. Compare the percentage of automobiles receiving discounts this year to that of last year.
• B. Ask managers whether they are aware of the discount criteria and whether they are providing the discount to all qualifying automobiles.
• C. Select a sample of automobiles that are not receiving the discount and determine if they have been properly excluded.
• D. Select a sample of automobiles receiving the discount and determine that the required discount criteria are being met.

Correct answer: C

Explanation

The correct answer is C because selecting a sample of automobiles not receiving the discount allows the auditor to verify whether they meet the criteria for the discount and were excluded correctly. Option A only compares data over time without assessing compliance, option B relies on managerial statements which may not be reliable, and option D does not address the completeness of the population eligible for the discount.