According to IIA guidance, the audit objective for an assurance engagement must consider the possibility of fraud and noncompliance. This consideration is essential for ensuring that the audit adequately addresses potential risks that could impact the organization. Assessing the possibility of fraud and noncompliance helps in identifying areas where controls might be deficient and where significant risks might be present, thus enabling the internal audit activity to provide meaningful and relevant recommendations.
Reference:
The Institute of Internal Auditors (IIA) Standard 2120 - Risk Management: "The internal audit activity must evaluate the potential for the occurrence of fraud and how the organization manages fraud risk." IIA Practice Guide on "Fraud Risk Assessment"

In the context of restructuring and consolidating divisions, providing consulting services that focus on operational efficiency is highly valuable. Internal auditors can leverage their understanding of the organization's processes and controls to advise division managers on streamlining operations. This includes identifying redundant processes, recommending best practices, and suggesting ways to optimize resource use. Such guidance helps the organization achieve a smoother transition and enhances overall efficiency, supporting the strategic objectives of the restructuring effort.
Reference:
The Institute of Internal Auditors (IIA) - Standards for the Professional Practice of Internal Auditing, Standard 2120 - Risk Management and Standard 2130 - Control

The data extracted by the internal auditor includes human resources data with employment conditions, payroll data, and entrance logs. With this information, the auditor can identify employees who are getting paid even though their employment has expired. By comparing the employment conditions and expiration dates in the HR data with the payroll data, the auditor can detect discrepancies where individuals continue to receive payments beyond their employment period. Entrance logs can help corroborate these findings by showing the lack of physical presence of these employees, further supporting the identification of ghost employees who no longer work for the organization but still appear on the payroll.
Reference:
IIA Practice Guide: "Auditing Employee Benefits"
COSO Internal Control - Integrated Framework

Step-by-Step Detailed Explanation:
A . Determine whether the purchasing department complies with policy by examining a random selection of purchase orders:
Correct. Reviewing a random sample of purchase orders is a standard procedure for evaluating compliance with purchasing policies, such as approval requirements, vendor selection, and adherence to budget constraints.
B . Evaluate whether purchasing requests are properly approved by authorized staff by obtaining independent verification from the vendors:
C . Ascertain whether material receipts are recorded on a timely basis by reviewing physical inventory stock counts:
Physical inventory reviews focus on inventory management and reconciliation, not specifically on the timeliness of receipts.
D . Determine whether prices charged for goods received are correct by reviewing the appropriate accounts payable record by vendor:
While reviewing accounts payable records helps verify the accuracy of pricing, it does not directly evaluate the purchasing department's adherence to procedures.
CIA Exam Syllabus Reference:
Domain V: Performing Internal Audit Services - Audit Engagement Objectives and Procedures.