Senior management wants assurance that third-party contractors are following procedures as agreed with the organization. Which type of audit would be most appropriate to achieve this objective?

Question

Options

• AA compliance audit.
• BA due diligence audit.
• CA financial audit.
• DAn external audit.

• A
  87% (26)
• B
  3% (1)
• C
  3% (1)
• D
  7% (2)

Explanation

A compliance audit is correct because its specific purpose is to verify that an entity (in this case, third-party contractors) is adhering to defined procedures, standards, contracts, or regulations - exactly what senior management needs confirmed.

Why the distractors are wrong:

• B. Due diligence audit is conducted before engaging a vendor to assess risks and suitability, not to monitor ongoing compliance.
• C. Financial audit examines the accuracy of financial statements and records - unrelated to procedural adherence by contractors.
• D. External audit describes who performs the audit (an independent outside party), not the audit's purpose - and the question asks about audit type/objective, not auditor origin.

Memory tip: Think "C for Checking" - a Compliance audit Checks that agreed-upon Contracts/procedures are being followed. Any time an exam question mentions "following agreed procedures" or "adherence to policy," compliance audit is almost always the answer.

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