Internal Audit Chp 1 Review Questions

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4 (c) What is the definition of Control?

Control is the process conducted by management to mitigate risks to acceptable levels.

2. How does The IIA define internal auditing?

Internal Auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bring a systematic, disciplined-approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

19. Why is it imperative that internal auditors have integrity?

Internal Auditors must have integrity because the users of their work products rely on the internal auditors' professional judgements to make important business decisions. These stakeholders must have confidence that internal auditors are trustworthy.

21. What are three common ways individuals enter the internal audit profession?

Many individuals enter the internal audit profession directly out of school. Others switch to internal auditing after beginning their careers in another area of the organization or public accounting. Some organizations require prospective managers to spend time working in internal auditing as part of their management trainee program.

22. Do most people who work in internal auditing spend their entire careers there?

Most people who work in internal auditing do not spend their entire careers there. They instead use internal auditing as a stepping stone into financial or non-financial management positions, either in the organizations they have been working for or in other organizations.

3. (d) Compliance objectives

Pertain to adherence to applicable laws and regulations

3. (b) Operations Objectives

Pertain to the effectiveness and efficiency of the organization's operations, including performance and profitability goals and safeguarding resources against loss.

3. (c) Reporting Objectives

Pertain to the reliability of internal and external reporting of financial and non-financial information

4. (b) What is the definition of risk management?

Risk management is the process conducted by management to understand and deal with uncertainties (risk and opportunities) that could affect the organization's ability to achieve its objectives.

23. What options does an individual have if he or she chooses to be a career internal auditor?

The options include progressing upward through the ranks of a single organization's internal audit function into internal audit management, advancing up the ladder by moving from one organization to another, or moving upward through the various levels in a firm that provides internal assurance and consulting services to other organizations.

Of the three components of the internal audit value proposition, what is insight?

The internal audit function is a catalyst for improving the effectiveness and efficiency by providing insight and recommendations based on analysis and assessments of data and business process.

Of the three components of the internal audit value proposition, what is assurance?

The internal audit function provides assurance on governance, risk management, and control processes to help the organization achieve its strategic, operational, financial, and compliance objectives.

20. How many core competencies are included in the IIA's Global Internal Auditor Competency Framework and for what general job levels are they recommended?

10 core competencies recommended for each broad job level, namely internal audit staff, internal audit management, and the CAE

3. What are the four categories of business objectives discussed in this chapter?

According to the Committee of Sponsoring Organizations of the Treadway (COSO's) ERM Framework, the four categories of business objectives introduced in chapter 1 are a. Strategic Objectives b. Operational Objectives c. Reporting Objectives d. Compliance Objectives

1. What are the three components of the internal audit value proposition set forth by The IIA (Institute of Internal Auditors)?

a. Assurance b. Insight - c. Objectivity -

Of the three components of the internal audit value proposition, what is objectivity?

i. The internal audit function, with commitment to integrity and accountability, provides value to the board and senior management as an objective source of independent advice.

3. (a) Strategic Objectives

pertain to the value creation choices management makes on behalf of the organization's stakeholders

6. What is the difference between independence and objectivity as they pertain to internal auditors?

Independence refers to organization status of the internal audit function and reflects the freedom from conditions that threaten objectivity or the appearance of objectivity. Individual Objectivity is an impartial, unbiased Mental Attitude and involves avoiding conflicts of interest, which allows internal auditors to perform engagements in such a manner that they have an honest belief in their work product and that no significant quality compromises are made.

12. What is co-sourcing? Why might an organization choose to co-source its internal audit function?

a. Co-sourcing means that an organization is supplementing its in-house internal audit function to some extent via the services of third-party vendors. b. Common situations in which an organization will co-source its internal audit function include circumstances in which the third party-vendor has specialized audit knowledge and skills that the organization does not have in-house and circumstances in which the organization has insufficient in-house internal audit resources to fully complete its planned engagements

17. What are the character traits, known as the 5-Cs, that are required for success in the internal audit profession?

a. Competence b. Credibility c. Connectivity d. Communication e. Courage

10. What are some of the factors that have fueled the dramatic increase in demand for internal audit services over the past 30 years?

a. Globalization b. Increase complex corporate structure c. e-commerce and other technological advances d. Global economic downturn e. New laws and regulations and professional guidance

4. What is the definition of governance?

a. Governance is the process conducted by the board of directors to authorize, direct, and oversee management toward the achievement of the organization's objectives.

11. What types of procedures might an internal auditor use to test the design adequacy and operating effectiveness of governance, risk management, and control processes?

a. Inquiring of managers and employees b. Observing activities c. Inspecting resources and documents d. Reperforming control activities e. Reperforming trend and ratio analysis f. Performing data analysis using computer-assisted audit techniques g. Gathering corroborating information from independent third parties. h. Performing direct tests of events and transactions

18. What are the seven inherent personal qualities listed in the chapters that are common among successful internal auditors?

a. Integrity b. Passion c. Work Ethic d. Curiosity e. Creativity f. Initiative g. Flexibility

15. What are the three parts of the CIA exam?

a. Internal Audit Basics b. Internal Audit Practice c. Internal Audit Knowledge Elements

5. What is the difference between internal assurance services and internal consulting services?

a. Internal assurance services involve an objective examination of evidence for the purpose of providing an independent assessment on the effectiveness of governance, risk management, and control processes for the organization. i. Involve three parties: the auditee, the internal auditor, and the user. b. The purpose of internal consulting services are advisory and elated services, the nature and scope of which are agreed to with the customer and that are intended to improve an organization's governance, risk management, and control processes without the internal auditor assuming management responsibility i. Involve two parties: the internal auditor and the customer.

7. What are the three fundamental phases in the internal audit engagement process?

a. Planning engagement b. Performing the engagement c. Communicating engagement outcomes

13. How is The IIA's leadership organization structured?

a. The IIA headquarters' executive leadership team is headed by the president and CEO, hundreds of volunteers, including the IIA's Global Board of Directors, also provide IIA leadership. b. The 38-member Global Board of Directors oversees the affairs of The IIA. c. The Board's Executive comprises: i. The Chairman of the board ii. The Senior Vice Chairman iii. Five Vice Chairmen iv. A Secretary v. Two most recent former chairmen of the board The board also includes the North American Board, which holds specific authority and oversight of North American activites, directors-at-large, ex-offcio direcots

16. What is the major objective of the Internal Audit Foundation?

a. The Internal Audit Foundation Exists to help audit leaders, practitioners, students, and academics experience continuous growth in their careers to propel them to become respected as trusted advisers as well as through leaders within the industry. b. "To shape, expand, and advance knowledge of internal auditing by developing and disseminating timely, relevant information and insights that address the needs of our stakeholders globally.

14. What are the two categories of guidance included in the IPPF?

a. The Mandatory Guidance, which includes the definition of internal auditing, the code of ethics, and the in b. Recommended Guidance, which includes implementation guidance and supplemental guidance

9. What is the primary difference between internal and external financial reporting assurance services?

a. The difference between internal and external financial reporting assurance services is their audience. b. External Auditors focus on the benefit of the third-party users. c. Internal Auditors focus on the benefit of management and board of directors. and provide financial reporting assurance services primarily for the benefit of management and the board of directors.

8. What is the relationship between auditing and accounting?

a. The relationship of auditing to accounting is very close, yet there nature is very different; they are business associates, not parent and child. b. Accounting i. Accounting includes collection, classification, summarization, and communication of financial data. ii. It involves the measurement and communication of business events and conditions as they affect and represent a given enterprise or other entity. iii. The task of accounting is to reduce a tremendous mass of detailed information to manageable and understandable proportions. c. Auditing i. Is similar to accounting BUT it DOES NOT have the task of measuring or communicating them. ii. Auditing is analytical, not constructive. iii. It is critical, investigative, concerned with the basis for accounting measurements and assertions. iv. Auditing emphasizes proof, the support for financial statements and data.


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