Which of the following best describes a consulting engagement rather an assurance engagement?

Question

Options

• ABank internal auditors review an activity checklist to determine that the loan officer followed
• BThe chief financial officer asks for the internal auditor's opinion regarding whether the new
• CAn internal auditor is assigned to assess whether a proposed new initiative to convert a customer
• DSenior management asks the internal audit activity to review compliance with customer data

• A
  5% (2)
• B
  7% (3)
• C
  74% (31)
• D
  14% (6)

Explanation

Option C describes a consulting engagement because the internal auditor is evaluating a proposed initiative - providing forward-looking advisory input to help management decide whether to proceed, rather than independently assessing an existing process or control. Consulting engagements are characterized by their advisory nature, agreed-upon scope with the client, and intent to add value without the auditor expressing a formal independent conclusion on a defined subject matter.

Option A is an assurance engagement - auditors are examining whether a loan officer complied with a checklist, which is an objective evaluation of existing activity against a standard. Option B is assurance because the CFO is seeking the auditor's independent opinion on whether something meets a criterion, the hallmark of a three-party assurance relationship. Option D is assurance because reviewing compliance with data requirements involves independently evaluating adherence to established standards and reporting findings to management.

Memory tip: Ask yourself, "Is the auditor evaluating what already exists (assurance) or helping shape what comes next (consulting)?" The word "proposed" in option C is the key signal - advising on a future initiative is consulting, while examining past or current performance against standards is assurance.

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