IA Final
If all other factors specified in a PPS sampling plan remain constant, changing the specified tolerable misstatement from $200,000 to $100,000 and changing the specified risk of incorrect acceptance from 10 percent to 5 percent would cause the required sample size to: a. Increase. b. Decrease. c. Remain the same. d. Change by 5 percent.
A
If all other factors specified in an attribute sampling plan remain constant, changing the expected population deviation rate from 1 percent to 2 percent and changing the tolerable deviation rate from 7 percent to 6 percent would cause the required sample size to: a. Increase. b. Decrease. c. Remain the same. d. Change by 2 percent.
A
The primary reason for an internal auditor to use statistical sampling rather than nonstatistical sampling is to: a. Allow the auditor to quantify, and therefore control, the risk of making an incorrect decision based on sample evidence. b. Obtain a smaller sample than would be required if nonstatistical sampling were used. c. Reduce the problems associated with the auditor's judgment concerning the competency of the evidence gathered when nonstatistical sampling is used. d. Obtain a sample more representative of the population than would be obtained if nonstatistical sampling techniques were used.
A
Which of the following is an element of sampling risk as opposed to an element of nonsampling risk? a. Determining a sample size that is too small. b. Performing an inappropriate audit procedure. c. Failing to detect a control deviation. d. Forgetting to perform a specified audit procedure.
A
If an auditor's preliminary evaluation of internal controls results in an observation that controls may be inadequate, the next step would be to: a. Expand audit work before the preparation of a final engagement communication. b. Prepare a flowchart depicting the internal control system. c. Note an exception in the engagement final communication if losses have occurred. d. Implement the desired controls.
a
If an internal auditor's evaluation of internal control design indicates that the controls are designed adequately, the appropriate next step would be to: a. test the operating effectiveness of the controls. b. prepare a flowchart depicting the system of internal controls. c. conclude that residual risk is low d. conclude that control risk is high
a
Internal auditors sometimes express opinions in addition to stating observations in their reports. Due professional care requires that internal audit opinions be: a. based on sufficient appropriate evidence. b. limited to the effectiveness of internal controls c. expressed only when requested by management or the audit committee d. based on experience and free from error in judgment
a
Recommendations should be included in final audit communications to: A. Provide management with options for addressing audit observations B. Ensure that problems are resolved in the manner suggested by the auditor C. Minimize the amount of time required to correct audit observations. D. Guarantee that audit observations are addressed, regardless of cost
a
Per IIA Standards, internal audit functions must establish: a. Internal quality assurance and improvement program assessments. b. External quality assurance and improvement program assessments. c. Both internal and external quality assurance and improvement program assessments. d. neither internal nor external quality assurance and improvement program assessments.
C
The achieved upper deviation limit is 7 percent and the risk of assessing control risk too low is 5 percent. How should the internal auditor interpret this attribute sampling outcome? a. There is a 7 percent chance that the deviation rate in the population is less than or equal to 5 percent. b. There is a 5 percent chance that the deviation rate in the population is less than 7 percent. c. There is a 5 percent chance that the deviation rate in the population exceeds 7 percent. d. There is a 95 percent chance that the deviation rate in the population equals 7 percent
C
Which of the following is not typically a barrier to internal auditors using data analytics in achieving the engagement objective? a. Knowing what data exists and where to find it. b. Poorly defining the scope of the intended use of data analytics. c. Data analytic software is limited by the number of records it can process. d. The effort required to cleanse and prepare data for import to the data analytic tool.
C
Which of the following is the most significant to the internal audit client in providing information related to the future direction and actions that can improve the operation of the organization? a. Descriptive. b. Diagnostic. c. Predictive. d. Prescriptive.
C
Which of the following is/are barriers to widespread use of data analytics by internal audit functions? I. The scope of the intended use of data analytics is not well defined. II. The amount of time required to clean and prepare data for analysis. III. The extensive programing skills required to perform data analytics. IV. Not understanding the data to be analyzed (its source, context, use, and meaning). a.II & III B. I & IV C.I,II, &IV D.ALL
C
Senior management has requested that the internal audit function perform an operational review of the telephone marketing operations of a major division and recommend procedures and policies for improving management control over the operation. The internal audit function should: a. Accept the audit engagement because independence would not be impaired b. Accept the engagement, but indicate to management that recommending controls would impair audit independence so that management knows that future audits of the area would be impaired. c. Not accept the engagement because internal audit functions are presumed to have expertise on accounting controls, not marketing controls. d. Not accept the engagement because recommending controls would impair future objectivity of the department regarding this client.
a
The primary purpose of issuing an interim report during an internal audit is to: A. Provide auditee management the opportunity to act on certain observations immediately B. Set the stage for the final report C. Promptly inform auditee management and their supervisors of audit procedures performed to date D. Describe the scope of the audit
a
The tasks performed during an internal audit assurance engagement should address the following questions: i. what are the reasons for the results? ii. how can performance be improved? iii. what results are being achieved? the chronological order in which these questions should be addressed is: a. iii, i, and ii b. i, iii, ii c. iii, ii, i d. ii, iii, i
a
Which of the following does the CAE need to consider when determining the extent of follow up required? I. Significance of the reported observation II. Past experience with the manager charged with the corrective action III. Degree of effort and cost needed for the corrective action IV. The experience of the internal audit staff. A. I and III B. I, II, and III C. II, III, and IV. D. I, II, III, and IV
a
Which of the following is not typically a key element of flowcharts or narrative memoranda? a. overall process objectives b. key inputs to the process c. key outputs from the process d. key risks and controls
a
Which of the following represent the most competent evidence that trade receivables actually exist? a. Positive confirmations. b. Sales invoices. c. Receiving reports. d. Bills of lading.
a
A specific objective of an audit of an organization's expenditure cycle is to determine if all goods paid for have been received and charged to the correct account. This objective would address which of the following primary objectives identified in the Standards? I. Reliability and integrity of financial and operational information. II. Compliance with laws, regulations, and contracts. III. Effectiveness and efficiency of operations. IV. Safeguarding of assets. a. I and II only b. I and IV only c. I, II, and IV only d. II, III, and IV only
b
The chief operating officer has requested that the internal audit function advise her regarding a new incentive plan being developed for sales representatives. Which of the following tasks should the CAE decline with respect to providing advice to the COO? a. researching and benchmarking incentive plans provided by other companies in the industry. b. determining the appropriate bonus formula for inclusion in the plan c. recommending monitoring procedures so that appropriate amounts are paid under the plan d. determining how to best document the support for amounts paid to provide a sufficient audit trail.
b
When assessing the risk associated with an activity, an internal auditor should A. Determine how the risk should best be managed. B. Provide assurance on the management of the risk. C. Update the risk management process based on risk exposures. D. Design controls to mitigate the identified risks.
b
When conducting a consulting engagement to improve the efficiency and quality of a production process, the audit team is faced with a scope limitation because several months of the production data have been lost or are incomplete. Faced with this scope limitation, the CAE should: a. Resign from the consulting engagement and conduct an audit to determine why several months of data are not available. b. Discuss the problem with the customer and together evaluate whether the engagement should be continued. c. Increase the frequency of auditing the activity in question. d. Communicate the potential effects of the scope limitation to the audit committee.
b
When conducting a consulting engagement to improve the efficiency of a production process, the internal audit team is faced with a scope limitation because several months of the production data has been lost or is incomplete. Faced with this scope limitation, the CAE should: a. halt the consulting engagement and conduct a separate assurance engagement to determine why the data was not available. b. discuss the problem with the customer and together evaluate whether the engagement should be continued c. complete the analysis without the data but include a scope limitation in the engagement report. d. report the scope limitation to the independent outside auditors.
b
Which of the following areas of culture presents the greatest challenge for internal audit functions who want to become trusted advisors? a. Receiving approval to include consulting services in the internal audit charter b. Educating all areas on the internal audit function's role in performing consultative internal audit services. c. Internal audit staff are trained to perform assurance engagements only. d. Movement to a more controlled environment for the corporate enterprise.
b
Which of the following best describes internal audit workpapers for consulting engagements? a. Workpapers are not required for consulting engagements. b. Workpaper requirements for consulting engagement are similar to assurance engagement but typically have less documentation. c. Consulting engagements typically required more documentation than assurance engagements. d. Workpapers for consulting engagements do not require a review by internal audit management
b
Which of the following controls is not likely to be an entity-level control? a. all employees must receive ongoing training to ensure they maintain their competence. b. all cash disbursement transactions must be approved before they are paid. c. all employees must comply with the Code of Ethics and Business Conduct. d. an organization-wide risk assessment is conducted annually
b
Which of the following is not a responsibility of the CAE? a. To communicate the internal audit function's plans and resource requirements to senior management and the board for review and approval. b. To oversee the establishment, administration, and assessment of the organization's system of internal controls and risk management processes. c. To follow up on whether appropriate management actions have been taken on significant issues cited in internal audit reports. d. To establish a risk-based plan to accomplish the objectives of the internal audit function consistent with the organization's goals.
b
Which of the following is not likely to be an assurance engagement objective? a. evaluate the design adequacy of the payroll input process. b. guarantee the accuracy of recorded inventory balances. c. assess compliance with health and safety laws and regulations. d. determine the operating effectiveness of fixed asset controls
b
Which of the following is true? a. Continuous monitoring is the CAE's responsibility. b. If a control breakdown is identified through continuous auditing, it should be reported to management on a timely basis. c. Data analytic technologies cannot be used for substantive testing. d. Continuous auditing routines developed by internal auditors should not be shared with management.
b
Which of the following statements does not illustrate the concept of inherent business risk? a. cash is more susceptible to theft than an inventory of sheet metal b. a broken lock on a security gate allows employees to access a restricted are that they are not authorized to enter. c. transactions involving complex calculations are more likely to be misstated than transactions involving simple calculations d. technological developments might make a particular product obsolete
b
Which of the following statements regarding audit evidence would be the least appropriate for an internal auditor to make? a. "I consider the level of risk involved when deciding the kind of evidence I will gather." b. "I do not perform procedures that provide persuasive evidence because I must obtain convincing evidence." c. "I evaluate both the usefulness of the evidence I can obtain and the cost to obtain it." d. "I am seldom absolutely certain about the conclusions I reach based on the evidence I examine."
b
Which of the following would not be considered a primary objective of a closing or exit conference? A. to resolve conflicts B. To identify concerns for future audit engagements C. To discuss the engagement observations and recommendations D. To identify management's actions and responses to the engagement observations and recommendations
b
Who has primary responsibility for providing information to the audit committee on the professional and organizational benefits of coordinating internal audit assurance and consulting activities with other assurance and consulting activities? a. The external auditor. b. The CAE. c. The CEO. d. Each assurance and consulting function.
b
Who is ultimately responsible for determining that the objectives for an internal audit engagement have been met? a. The individual internal audit staff member. b. The CAE. c. The audit committee. d. The internal audit engagement supervisor.
b
which of the following controls is likely to be least relevant when evaluating the design adequacy of a cash collections process? a. calculating the amount of cash received b. documenting the rationale for selecting the bank account into which the deposit will be made. c. matching the total deposits to the amounts credited to customers' accounts receivable balances. d. segregating the preparation of deposit slips from the adjustment of customer account balances
b
15. Which of the following activities are designed to provide feedback on the effectiveness of an internal audit activity? I. Proper supervision II. Proper training III. Internal assessments IV. External assessments a. I, II, III only b. I, II, IV only c. I, III, IV only d. All of these
c
A financial services organization is planning on staffing a complex consulting engagement that involves the consolidation of two large banking organizations, including changing many of the processes. Which of the following skills is the least important skill for auditors to possess in assisting in the review of target processes? a. Ability to quickly develop relationships b. Specific business related skills related to the processes being re engineered. c. Experience in performing testing of controls. d. Unstructured problem solving skills
c
A performance audit engagement typically involves: A. Review of financial statement information, including the appropriateness of various accounting treatments. B. Tests of compliance with policies, procedures, laws, and regulations. C. Appraisal of the environment and comparison against established criteria. D. Evaluation of organizational and departmental structures, including assessments of process flows.
c
A production manager of MSM Company ordered excessive raw materials and had them delivered to a side business he operated. The manager falsified receiving reports and approved the invoices for payment. Which of the following procedures would most likely detect this fraud? a. Vouch cash disbursements to receiving reports and invoices. b. Confirm the amounts of raw materials purchased, purchase prices, and dates of shipment with vendors. c. Perform ratio and trend analysis. Compare the cost of raw materials purchased with the cost of good purchased. d. Observe the receiving dock and count materials received . Compare the count with receiving reports completed by receiving personnel.
c
According to the IPPF, which of the following are part of the minimum requirements for an engagement final communication? I. Background information II. Purpose of the engagement III. Engagement scope IV. Results of the engagement V. Summaries A. I, II, an IV B. I, III, and V C. II, III, and IV D. II, IV, and V
c
An excerpt from an internal audit observation indicates that travel advances exceeded prescribed maximum amounts. Company policy provides travel funds to authorized employees for travel. Advances are not exceed 45 days of anticipated expenses. Company procedures do not require justification for large travel advances. In this audit observation, the element of an audit finding known as "effect" is: A. Advances are not to exceed estimated expenses for 45 days. B. Travel advances exceed prescribed maximum amounts. C. Employees accumulate large, unneeded advances D. Unauthorized employees are given travel advances
c
An internal auditor is concerned that fraud, in the form of payments to fictitious vendors, may exist. Company purchasers, responsible for purchase of specific product lines, have been granted the authority to approve expenditures up to $10,000. Which of the following applications of generalized audit software would be most efficient in addressing the auditor's concern? a. List all purchases over $10,000 to determine whether they were properly approved. b. Take a random sample of all expenditures under $10,000 to determine whether they were properly approved. c. List all major vendors by product line. Select a sample of major vendors and examine supporting documentation for goods and services received. d. List all major vendors by product line. Select a sample of major vendors and send negative confirmations to validate that they actually provided goods or services.
c
An internal auditor must weigh the cost of an audit procedure against the persuasiveness of the evidence to be gathered. Observation is one audit procedure that involves cost-benefit tradeoffs. Which of the following statements regarding observation as an audit procedure is/are correct? I. Observation is limited because individuals may react differently when being watched. II. Observation is more effective for testing completeness than it is for testing existence. III. Observation provides evidence about whether certain controls are operating as designed. a. I only. b. II only. c. I and III. d. I, II, and III.
c
During a review of purchasing operations, an internal auditor found that procedures in use did not agree with stated company procedures. However, audit tests revealed that the procedures used represented an increase in efficiency and a decrease in processing time, without a discernible decrease in control. The internal auditor should: A. Report the lack of adherence to documented procedures as an operational deficiency B. Develop a flowchart of the new procedures and include it in the report to management. C. Report the change and suggest that the change in procedures be documented D. Suspend the completion of the engagement client documents the new procedures
c
Internal auditors obtain an understanding of controls and perform tests of controls to: a. detect material misstatements in account balances b. reduce control risk to an acceptably low level. c. evaluate the design adequacy and operating effectiveness of the controls. d. assess the inherent risks associated with transactions.
c
Internal auditors perform both assurance engagements and consulting engagements. Which of the following would be classified as a consulting engagements? a. directly assessing the organization's compliance with laws and regulations. b. assessing the design adequacy of the organization's entity-level monitoring activities c. facilitating senior management's assessment of risks threatening the organization. d. assisting the independent outside auditor during the financial statement audit engagement.
c
It would be appropriate for the internal audit function to perform which of the following? a. design controls for a process b. develop a new whistleblower policy c. review a new IT application before implementation d. lead a process reengineering project
c
Professional Skepticism means that internal auditors beginning an assurance engagement should: a. Assume client personnel are dishonest until they gather evidence that clearly indicates otherwise b. Assume client personnel are honest until they gather evidence that clearly indicates otherwise. c. Neither assume client personnel are honest nor assume they are dishonest. d. Assume that internal controls are designed inadequately and/or operating ineffectively.
c
The Standards requires the CAE to share information and coordinate activities with other internal and external providers of assurance services. With regard to the independent outside auditor, which of the following would not be an appropriate way for the CAE to meet this requirement? a. Holding a meeting between the CAE and the independent outside audit firm's partner to discuss the upcoming audit of the financial statements. b. Providing the independent outside auditor with access to the working papers for an audit of third-party contractors. c. Requiring the independent outside auditor to have the CAE's approval of their annual audit plan for conducting the financial statement audit. d. Requesting that the internal audit function receive a copy of the independent outside auditor's management letter.
c
The audit committee has requested that the internal audit function assist with the annual risk assessment process. What type of consulting engagement does this assistance represent? a. an assurance engagement b. a training consulting engagement c. a facilitative consulting engagement d. an advisory consulting engagement
c
Which of the following auditee-prepared documents will likely be of greatest assistance to the internal auditor in their assessment of process design adequacy? a. policies and procedures manual b. organization charts and job descriptions c. detailed flowcharts depicting the flow of the process d. narrative memoranda listing key tasks for portions of the process
c
Which of the following is appropriate conclusion that can be drawn when the internal auditor idenitifies an observation from testing controls? a. the process objectives cannot be achieved b. the area may be vulnerable to fraud c. certain risks are not effectively mitigated d. overall, the process is not operating effectively
c
Which of the following is the best reason for the CAE to consider the organization's strategic plan in developing the annual internal audit plan? a. To emphasize the importance of the internal audit function to the organization. b. To make recommendations to improve the strategic plan. c. To ensure that the internal audit plan supports the overall business objectives. d. To provide assurance that the strategic plan is consistent with the organization's values.
c
Which of the following most completely describes the appropriate content of internal audit assurance engagement working papers? a. Objectives, procedures, and conclusions. b. Purpose, criteria, techniques, and conclusions. c. Objectives, procedures, facts, conclusions, and recommendations. d. Subject, purpose, sampling information, and analysis.
c
Which of the following would be a typical consulting engagement activity performed by the internal audit function? a. Testing compliance with accounts payable policies and procedures. b. determining the scope of an engagement to test IT application controls. c. reviewing and commenting on a draft of a new ethics policy created by the company e. testing the design adequacy of controls over the termination of employees.
c
10. Audit committees are most likely to participate in the approval of: a. Audit staff promotions and salary increases b. The internal audit report observations and recommendations c. Audit work schedules d. The appointment of the CAE
d
11. According to the IPPF, the independence of the internal audit activity is achieved through: a. Staffing and supervision b. Continuing professional development and due professional care c. Human relations and communications d. Organizational status and objectivity
d
13. According to the IPPF, internal auditors should possess which of the following skills? I. Internal auditors should understand human relations and be skilled in dealing with people. II. Internal auditors should be able to recognize and evaluate the materiality and significance of deviations from good business practices. III. Internal auditors should be experts on subjects such as economics, commercial law, taxation, finance, and IT. IV. Internal auditors should be skilled in oral and written communications a. II only b. I and III only c. III and IV only d. I, II, and IV only
d
A follow-up review found that a significant internal control weakness had not been corrected. The CAE discussed this matter with senior management and was informed of management's willingness to accept the risk. The CAE should: a. Do nothing further because management is responsible for deciding the appropriate action to be taken in response to reported engagement observations and recommendations. b. Initiate a fraud investigation to determine if employees had taken advantage of the internal control weakness. c. Inform senior management that the weakness must be corrected and schedule another follow-up review. d. Assess the reasons that senior management decided to accept the risk and inform the board of senior management's decision.
d
A formal engagement communication must: A. provide an opportunity for the auditee to respond B. Document the corrective actions required of senior management C. Provide a formal means by which the independent outside auditor assesses potential reliance on the internal audit function D. Report significant observations
d
A process objective stating "all contracts must be approved by an officer of the company before being consummated" is an example of what type of objective? a. strategic b. operations c. reporting d. compliance
d
While planning an assurance engagement, the internal auditors obtains knowledge about the auditee's operations to, among other things: a. develop an attitude of professional skepticism concerning management assertions b. make constructive suggestions to management regarding internal control improvements c. evaluate whether misstatements in the auditee's performance reports should be communicated to senior management and the audit committee d. develop an understanding of the audtiee's objectives, risks, and controls
d
internal auditors are working to become trusted advisers to management techniques. Which of the following would be the best way for internal audit to demonstrate they are truly a trusted advisor? a. Providing testing of key controls b. Assisting management in developing procedures for accounts payable c. Performing a post-implementation review after a system has been installed. d. providing guidance and audit resources to develop an enterprise risk management process for the organization.
d
which of the following is not a required consideration regarding proficiency and due professional care when choosing to perform consulting engagement? a. availability of adequate skills and resources to conduct the engagement. b. needs and expectations of the engagement customer. c. cost of the engagement relative to the potential benefits. d. potential impact on the independent outside auditor's financial statement audit.
d
An internal auditor should consider the qualitative aspects of deviations found in a sample in addition to evaluating the number of deviations. For which of the following situations should the internal auditor be most concerned? a. There were fewer deviations in the sample than expected. b. The deviations found are similar in nature to those found during the last audit of the area. c. The deviations found appear to have been caused by an employee's misunderstanding of instructions. d. The deviations found may have been caused intentionally.
D
An internal auditor wants to test customers' accounts receivable balances for overstatement on a sample basis. Which of the following would be the least valid reason for deciding to use PPS sampling rather than classical variables sampling? a. PPS sampling is generally thought to be easier to use than classical variables sampling. b. The internal auditor expects to find no misstatements and PPS sampling typically requires a smaller sample size than classical variables sampling in this situation. c. PPS sampling automatically stratifies the population. d. Using PPS sampling eliminates the need for professional judgment in determining the appropriate
D
For which of the following would an internal auditor most likely use attribute sampling? a. Determining whether the year-end inventory balance is overstated. b. Selecting fixed asset additions to inspect. c. Choosing inventory items to test count. d. Inspecting employee time cards for proper approval.
D
An internal auditor is testing cash disbursement transactions. Internal control policies require every check request to be accompanied by an approved voucher (that is, a package of documents evidencing that a good or service has been received and invoiced by the vendor). The voucher approval is based on a three-way matching of a purchase order, receiving report, and vendor's invoice. To determine whether checks have proper support, the internal auditor should begin her testing procedures by selecting items from the population of: a. Check copies. b. Purchase orders. c. Receiving reports. d. Approved vouchers.
A
An internal auditor selects a sample of sales invoices and matches them to shipping documents. This procedure most directly addresses which of the following assertions? a. All shipments to customers are recorded as receivables. b. All billed sales are for goods shipped to customers. c. All recorded receivables represent goods shipped to customers. d. All shipments to customers are billed.
B
14. Which of the following best describes an auditor's responsibility after noting some indicators of fraud? a. Expand activities to determine whether an investigation is warranted b. Report the possibility of fraud to senior management and ask how to proceed c. Consult with external legal counsel to determine the course of action to be taken d. Report the matter to the audit committee and request funding for outside specialists to help investigate the possible fraud
a
9. Organizational independence exists if the CAE reports <List A> to some other organizational level than the CEO or similar head of the organization as long as the internal audit activity <List B> without interference: a. List A: Administratively; List B: controls the scope and performance of work and reporting of results b. List A: administratively; List B: approved the internal audit budget and risk-based internal audit plan c. List A: functionally; List B: controls the scope and performance of work and reporting of results d. List A: functionally; List B: approves the internal audit budget and risk-based internal audit plan
a
Competent evidence is best defined as evidence that: a. Is reasonably free from error and bias and faithfully represents that which it purports to represent. b. Is obtained by observing people, property, and events c. Is supplementary to other evidence already gathered and that tends to strengthen or confirm it. d. Proves an intermediate fact, or group of facts, from which still other facts can be inferred
a
Comprehensive risk assessment involves analysis of both cause and effects. Which of the following statements concerning the analysis of causes and effects is false? a. Analyzing the causes and effects of a particular risk should only be performed after the internal auditor has first obtained evidence that a problem has occurred. b. analyzing the effects of a particular risk provides insights about the objective threatened by the risk c. analyzing the effects of a particular risk provides insights about the relative size of the risk and the relative importance of the business objective threatened by the risk. d. analyzing the root causes of a particular risk helps the internal auditor formulate recommendations for reducing the risk to an acceptable level.
a
Documentary evidence is one of the principal types of corroborating information used by an internal auditor. Which one of the following examples of documentary evidence generally is considered the most reliable? a. A vendor's invoice obtained from the accounts payable department. b. A credit memorandum prepared by he credit manager. c. A receiving report obtained from the receiving department. d. A copy of a sales invoice prepared by the sales team.
a
Which of the following statements best describes an internal audit function's responsibility for assurance engagement follow-up activities? a. the internal audit function should determine that corrective action has been taken and is achieving the desired results, or that senior management has assumed the risk associated with not taking corrective action on reported observations. b. the internal audit function should determine whether management has initiated corrective action but has no responsibility to determine whether the corrective action is achieving the desired results. That determination is management's responsibility. c. The CAE is responsible for scheduling audit follow-up activities only if asked to do so by senior management or the audit committee. Otherwise, such activities are discretionary. d. audit follow-up activities are not necessary if the auditee has agreed in writing to implement the internal audit function's recommendations.
a
Which of the following statements best describes the internal audit function's responsibility for follow-up activities related to a previous engagement? a. Internal auditors should determine if corrective action has been taken and is achieving the desired results or if management has assumed the risk of not taking the corrective action. b. Internal auditors should determine if management has initiated corrective action, but they have no responsibility to determine if the action is achieving the desired results. That determination is management's responsibility. c. The CAE is responsible for scheduling follow-up activities only if directed to do so by senior management or the audit committee. Otherwise, follow-up is entirely discretionary. d. None of the above
a
Workpaper summaries, if prepared, can be used to: a. Promote efficient workpaper review by internal auditing supervisors. b. Replace the detailed workpaper files for permanent retention. c. Serve as an internal audit report to senior management. d. Document the full development of audit findings.
a
Your audit objective is to determine that purchases of office supplies have been properly authorized. If purchases of the office supplies are made through the purchasing department, which of the following procedures is most appropriate? a. Vouch purchase orders to approved purchase requisitions. b. Trace approved purchase requisitions to purchase orders. c. Inspect purchase requisitions for proper approval. d. Vouch receiving reports to approved purchase orders.
a
once an observation is identified by the internal auditor, it should be: a. documented in the working papers b. discussed with the audit committee c. included in the final audit report d. scheduled for follow-up
a
12. Which of the following activities undertaken by the internal auditor might be in conflict with the standard of independence? a. Risk management consultant b. Product development team leader c. Ethics advocate d. External audit liaison
b
An internal auditor determines that the process is not designed adequately to reduce the underlying risks to an acceptable level. Which of the following should the internal auditor do next? a. write the audit report, there's no reason to test the operating effectiveness of controls that are not designed adequately. b. test compensating controls in other (adjacent) processes to see if the impact of the design inadequacy is reduced to an acceptable level. c. test the existing key controls anyway to prove that, despite the design inadequacy, the process is still meeting the process objectives. d. postpones the engagement until the design inadequacy has been rectified.
b
Audit evidence is generally considered sufficient when: a. It is appropriate. b. There is enough of it to support well-founded conclusions. c. It is relevant, reliable, and free from bias. d. It has been obtained via random sampling.
b
In deciding whether to schedule the purchasing or the personnel department for an audit engagement, which of the following would be the least important factor? a.There have been major changes in operations in one of the departments. b. The audit staff has recently added an individual with expertise in one of the areas. c. There are more opportunities to achieve operating benefits in one of the departments than in the other. d.The potential for loss is significantly greater in one department tan in the other.
b
In which of the following scenarios do consulting services provided by the internal audit function prove to be most beneficial? a. An organization that is completely stable and has very little change. b. An organization that has frequent, significant change c. An organization that wants to reduce the level of change in the organization. d. An organization that has a lot of standards and procedures already in place and does not want to change them.
b
Internal audit engagement teams prepare working papers primarily for the benefit of the: a. Auditee b. Internal audit function. c. Board and senior management. d. Independent outside auditor.
b
Senior management of an organization has requested that the internal audit function help educate employees about internal control concepts. This work is an example of which type of engagement: a. an assurance engagement b. a training consulting engagement c. a facilitative consulting engagement d. an advisory consulting engagement
b
Which of the following is not likely to be a step during a consulting engagement? a. understanding the objectives of a process b. assessing the risks in a process c. flowcharting the key steps in a process d. expressing a conclusion on the design adequacy and operating effectiveness of a process
d
Which of the following external risks is least likely to impact the accuracy of financial reporting? a. the standard setting body in the organization's country issues a new financial accounting standard b. a recent judicial court case increases the likelihood that pending litigation will result in an unfavorable outcome. c. changes in standard industry contracts now allow for netting of payables and receivables. d. competitor pressures cause the organization to pursue new sales channels.
d
Analytical procedures can be applied during which phase(s) of an assurance engagement? a. plan phase b. perform phase c. communicate phase d. plan and perform phases
d
If an internal auditor identifies an exception while testing, which of the following may be appropriate? a. test additional items to determine whether the exception is an isolated occurrence or indicative of a control deficiency. b. gain an understanding of the root cause, that is, the reason the exception occurred. c. draft an observation for the audit report. d. all of the above
d
In an assurance engagement of treasury operations, an internal auditor is required to consider all of the following issues except: A. The audit committee has requested assurance on the treasury department's compliance with a new policy on the use of financial instruments. B. Treasury management has not instituted any risk management policies. C. Due to the recent sale of a division, the amount of cash and marketable securities managed by the treasury department has increased by 350 percent. D. The external auditors have indicated some difficulties in obtaining account confirmations.
d
In which phase(s) of the internal audit engagement can data analytics be used? I. Planning the individual engagement. II. Testing effectiveness and efficiency of controls. III. Assessing risk to determine which areas of the organization to audit. A. I B. II C.I &III D.I, II AND III
d
Internal audit reports can be structured to motivate management to correct deficiencies. Which of the following report-writing techniques is most likely to be effective? A. State the procedural inadequacies and resulting improprieties in specific terms B. Recommend changes and state the punitive measures that will follow if the recommendations are not implemented C. List the deficiencies found so as to provide an easy-to-follow checklist D. Suggest practical improvements to address the identified observations
d
Reported internal audit observation emerge as a result of comparing" what should be" with "what is". In determining" what should be" during an internal audit engagement, which of the following would be the least appropriate criterion against which to assess current controls? a. Industry best practices b. Control policies and procedures prescribed by senior management. c. A standard of control effectiveness determined by the internal audit function. d. The controls documented as being in place during the last audit.
d
Reported internal audit observations emerge by a process of comparing "what should be" with "what is." In determining "what should be" during an audit of a company's treasury function, which of the following would be the least desirable criterion against which to judge current operations? a. best practices of the treasury function in relevant industries. b. company policies and procedure delegating authority and assigning responsibilities c. performance standard established by senior management. d. the operations of the treasury function as documented during the last audit.
d
The Standards requires policies and procedures to guide the internal audit staff. Which of the following statements is false with respect to this requirement? a. A small internal audit function may be managed informally through close supervision and written memos. b. Formal administrative and technical audit manuals may not be needed by all internal audit functions. c. The CAE should establish the function's policies and procedures. d. All internal audit functions should have a detailed policies and procedures manual.
d
The primary reason for having written formal audit reports is to: a. Provide an opportunity for engagement client response. b. Document the corrective actions required of senior management. c. Provide a formal means by which the external auditor assesses potential reliance on the internal audit function. d. Record observations and recommended courses of action.
d
Which auditor will be the most successful in being perceived as a "Trusted Advisor"? a. One who audits using a checklist. b. One who best uses audit sampling techniques c. One who ensures 100 percent compliance with all policies, procedures, and rules. d. One who collaborates with management to reach a consensus on the best solution to balance controls and efficient processes.
d
Which of the following groups' risk tolerance levels are least relevant when conducting an assurance engagement? a. senior management b. process-level management c. the internal audit function d. vendors and customers
d
