Certified Government Auditing Professional (CGAP) Practice Exam

What should an auditor assess when a client explains that an accounting change will take significantly more resources than estimated?

1. Insist on implementation at all costs

2. Evaluate the cost and time implications realistically

3. Drop the recommendation if it appears costly

4. Accuse the client of budget manipulation

The correct answer is: Evaluate the cost and time implications realistically

Evaluating the cost and time implications realistically is crucial when a client indicates that an accounting change will require significantly more resources than initially estimated. This assessment involves thoroughly analyzing the client's justification for the increased resources and understanding the underlying reasons for the change in estimates. A key aspect of this evaluation is to ensure that the client's resource allocation aligns with auditing standards and best practices. It allows the auditor to determine if the accounting change is still in the best interest of the organization despite the higher costs and time commitments. Moreover, it helps the auditor to provide informed recommendations or adjustments to the implementation process, ensuring compliance with relevant regulations and fostering a productive environment for the client. By taking a realistic approach to assess implications, the auditor can help the client balance the benefits of the accounting change against its costs, ensuring that the financial health of the organization is not compromised while maintaining adherence to accounting principles. This fosters effective communication and collaboration between the auditor and the client, ultimately enhancing the auditing process and outcome.