CH 1: Internal Auditing Overview

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True

A major reason for establishing an internal audit activity is to establish effective internal controls.

False

A typical responsibility of an internal auditor is the preparation of a company's financial statements.

True

An example of an assurance service is a compliance engagement.

False

External auditors are required to notify external parties, such as regulators, when they find irregularities or illegal acts; internal auditors are not required to notify third parties about these matters.

?? occasionally

External auditors never perform compliance auditing work.

True

Generally speaking, external auditors are not concerned about operating efficiencies.

False

Independence applies to external auditors, not independent auditors.

True

The proper organizational role of internal auditing is to serve as an independent, objective assurance and consulting activity that adds value to the operations.

False

Internal audit activities involve consulting but not assurance services.

False

Internal auditors are obligated to coordinate with external auditors and external auditors are required to use the work of internal auditors if they are competent.

??

Jim is the new internal auditor for X Co. He was in charge of payroll for X Co. just 10 months ago. It would be an impairment of independence if Jim provided consulting activities

True

Public policy considerations have contributed significantly to the broadened scope of internal auditing.

False

The Sarbanes Oxley Act established the requirement that public companies have an internal audit function.

False

The audit committee should be composed of management directors.

True

The financial audit examines the reliability and integrity of accounting records.

True

The internal auditing profession has advanced primarily because of the increased complexity and sophistication of business operations.

False

The most important benefit of an internal auditing activity to management is assurance that the organization is complying with legal requirements.

False

The most important benefit of the internal auditing activity is assurance that fraudulent activities will be detected.

False

The most important objective of the IIA is to oversee the activities of internal auditors.

False

The person generally responsible for the coordination between external and internal auditors is the chair of the audit committee.

True

The scope of internal auditing includes a systematic approach to evaluating the adequacy and effectiveness of financial statements.

True

The scope of the work of internal auditing should provide reasonable assurance that the system of internal control is effective and efficient.

True

The work of the internal auditor involves evaluating and contributing to the improvement of risk management systems.


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