Internal Auditing Chapter 6

Audit engagement programs should: a. be tailored for the audit of each business area within the organization b. be generalized to fit all situations without regard to departmental lines. c. be generalized so as to be usable at various international locations of an organizations. d. reduce costly duplication of effort by ensuring that every aspect of an operation is examined.

a. be tailored for the audit of each business area within the organization

The requirement that purchases be made from suppliers on an approved vendor list in an example of: a. preventive control b. detective control c. corrective control d. monitoring control

a. preventive control

Appropriate internal control for a multinational cooporations's branch office that has a department responsible for the transfer of money requires that: a. the individual who initiates wire transfers does not reconcile the bank statement b. the branch manager must receive all wire transfers c. foreign currency rates must be computed separately by two different employees d. corporate management approves the hiring of employees in this department

a. the individual who initiates wire transfers does not reconcile the bank statement

Which of the following best describes an internal auditor's prupose in reviewing the organization's existing governace, risk management, and control processes? a. to help determine the nature, timing, and extent of tests necessary to achieve engagement objectives. b. to ensure that weaknesses in the internal control system are corrected. c. to provide reasonable assurance that the processes will enable the organization's objectives and goals to be met efficiently and economically. d. to determine whether the processes ensure that the accounting records are correct that financial statements are fairly stated.

a. to help determine the nature, timing, and extent of tests necessary to achieve engagement objectives.

An adequate system of internal controls is most likely to detect a fraud perpetrated by: a. group of employees in collusion b. single employee c. group of managers in collusion d. single manager

b. single employee

An internal auditor plans to conduct an audit of the adquacy of controls over investments in new financial instruments. Which of the following would not be required as part of such an engagement? a. determine whether policies exist that describe the risks the treasurer may take and the types of instruments in which the treasurer may invest. b. determine the extent of management oversight over investments in sophisticated instruments. c. determine whether the treasurer is getting higher or lower rates of return on investments than treasurers in comparable organizations. d. determine the nature of monitoring activities related to the investment portfolio

c. determine whether the treasurer is getting higher or lower rates of return on investments than treasurers in comparable organizations.

The control that would most liely ensure that payroll checks are written only for authorized amounts is to: a. conduct periodic floor verification of employees on the payroll b. require the return on undelivered checks to the cashier c. require supervisory approval of employee timecards d. periodically witness the distribution of payroll checks.

c. require supervisory approval of employee timecards

What is residual risk? a. impact of risk b. risk that is under control c. risk that is not managed d. underlying risk in the environment

c. risk that is not managed

Who has primary responsibilty for the monitoring component of internal control? a. the organization's independent outside auditor b. the organization's internal audit function c. the organization's management d. the organization's board of directors

c. the organization's management