Neural networks are effective in detecting fraud because they have the capability to consider a large number of variables when trying to resolve a problem.

Explanation/Reference:
Explanation:
Communicating the possibility of a conflict of interest to management prior to starting the assignment is the correct answer. A possible conflict of interest, likely to affect the auditor's independence, should be brought to the attention of management prior to starting the assignment. Declining the assignment is not the correct answer because the assignment could be accepted after obtaining management approval.
Informing management of the possible conflict of interest after completion of the audit assignment is not correct because approval should be obtained prior to commencement and not after the completion of the assignment. Informing the business continuity planning (BCP) team of the possible conflict of interest prior to starting of the assignment is not the correct answer since the BCP team would not have the authority to decide on this issue.

Section: Protection of Information Assets
Explanation:
Preparing simulated transactions for processing and comparing the results to predetermined results is the
best method for proving accuracy of a tax calculation. Detailed visual review, flowcharting and analysis of
source code are not effective methods, and monthly totals would not address the accuracy of individual tax
calculations.

The IS auditor should inform audit management of the earlier involvement in designing the application. This is to ensure that there is no conflict of interest or bias that may affect the objectivity or independence of the audit.
Audit management can then decide whether to assign a different auditor or to proceed with the same auditor with appropriate safeguards. The other options are not appropriate for the IS auditor to do in this situation.
Refusing the assignment to avoid conflict of interest is an extreme measure that may not be necessary or feasible, especially if there are no other qualified auditors available. Using the knowledge of the application to carry out the audit is risky, as it may lead to overlooking or ignoring potential issues or errors in the application. Modifying the scope of the audit is not advisable, as it may compromise the quality or completeness of the audit. References: CISA Review Manual (Digital Version), Chapter 2, Section 2.1