What the Auditor Should Do
Question
As a result of an audit, a policy exception was identified that had been approved by the compliance officer. The auditor determined that the policy exception is a violation of a regulatory requirement.
What should the auditor do?
Answers
Explanations
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A. B. C. D.B
In this scenario, the auditor has discovered a policy exception that was approved by the compliance officer, but upon further examination, it is determined that the policy exception violates a regulatory requirement. The question asks what the auditor should do in response to this finding. Let's analyze each answer choice to determine the most appropriate course of action:
A. Advise the compliance officer on how to appropriately respond to policy exceptions. This answer suggests that the auditor should provide guidance to the compliance officer on how to handle policy exceptions. While it may be helpful for the auditor to offer advice, it does not address the fact that a regulatory violation has occurred. Therefore, this option is not the best choice.
B. Include the regulatory violation in the audit report and report it to the board of directors. This option recommends including the regulatory violation in the audit report and reporting it to the board of directors. Reporting the violation to the board of directors is a crucial step because they are responsible for overseeing the organization's compliance efforts. By including the violation in the audit report, the auditor provides a transparent account of the issue and ensures that it receives appropriate attention. This is a suitable action to take when a regulatory violation is identified during an audit. Therefore, this option appears to be the most appropriate choice.
C. Consult with legal counsel to determine if the approval of the policy exception was acceptable. While seeking legal counsel can be helpful in certain situations, it does not directly address the fact that a regulatory violation has been identified. Legal counsel may provide guidance on the legality of the approval process, but it does not address the violation itself. Therefore, this option is not the most appropriate course of action in this scenario.
D. Include the regulatory violation in the audit report and recommend the compliance officer be subject to disciplinary action by the board of directors. This option suggests including the regulatory violation in the audit report and recommending disciplinary action against the compliance officer. While it is important to address any compliance failures and take appropriate actions, it is premature to recommend disciplinary action without further investigation or discussion. The initial step should be to report the violation to the board of directors, who can then assess the situation and determine if disciplinary action is warranted. Therefore, this option is not the best choice at this stage.
To summarize, the most appropriate action for the auditor in this scenario would be to include the regulatory violation in the audit report and report it to the board of directors (option B). This ensures that the violation is properly documented, reported to the relevant authority, and can be addressed by the appropriate decision-making body within the organization.
