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Question 108

A staff auditor, nearly finished with an audit engagement, discovers that the director of marketing has a gambling habit. The gambling issue is not directly related to the existing engagement and there is pressure to complete the current engagement. The auditor notes the problem and forwards the information to the chief audit executive but performs no further follow-up. The auditor's actions would:

I. Be in violation of the IIA Code of Ethics for withholding meaningful information.

II. Be in violation of the Standards because the auditor did not properly follow up on a red flag that might indicate the existence of fraud.

III. Not be in violation of either the IIA Code of Ethics or Standards.

    Correct Answer: D

    The auditor's actions would be in violation of both the IIA Code of Ethics and the Standards. Firstly, it is a violation of the IIA Code of Ethics because the auditor withheld meaningful information that could impact the organization's risk profile or operational integrity. Secondly, it is a violation of the Standards because auditors have a responsibility to follow up on red flags that may indicate fraud or other significant issues, even if they are outside the scope of the current engagement. By not pursuing the gambling issue further, the auditor failed to adhere to these responsibilities.

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Part 1 Question.