Certified Government Auditing Professional (CGAP) Practice Exam

If local employees in a foreign country are receiving excessive separation pay, what should the auditor's course of action be?

1. Immediately stop payments to the local controller

2. Seek to recover overpayments from those who separated

3. Report findings without taking immediate action

4. Advise on changes to the separation pay agreement

The correct answer is: Seek to recover overpayments from those who separated

When local employees in a foreign country are found to be receiving excessive separation pay, the most appropriate course of action involves seeking to recover overpayments from those who separated. This approach is aligned with the auditor's responsibility to ensure that public funds are managed prudently and in accordance with established policies and regulations. By recovering these funds, the organization can remedy the financial implications of the overpayments and reinforce accountability for financial management practices. This action also addresses the root of the problem by attempting to rectify the excessive payments, thereby mitigating potential losses and enhancing the effectiveness of the organization's financial oversight. It demonstrates a commitment to enforcing compliance with contractual obligations and ethical standards, essential tenets of good governance. In contrast, other options, such as immediately stopping payments to the local controller, would not necessarily resolve the issue and could disrupt operations. Reporting findings without taking action fails to address the financial implications of the overpayments directly, leaving the organization exposed to ongoing risk. Advising on changes to the separation pay agreement is valuable for preventing future occurrences but does not tackle the immediate problem of recovering funds that have already been disbursed. Thus, seeking recovery stands as the proactive measure necessary to uphold accountability and effective fiscal management.