Chapter 5-8 MCQ

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

d

when discussing integration of IT into audit engagements, which of the following is the most desirable integration of IT into specific engagements? a. developing and integrating testing of IT controls into process-level audits b. developing and performing computer audit software steps into process-level audits c. auditing controls around the computer to make sure the computer controls are working effectively d. developing and performing computer audit software steps into the process-level audits along with testing of IT controls

c

which of the following best describes an internal auditor's purpose in reviewing the organization's existing governance, 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 and that financial statements are fairly stated

d

a company has recently outsourced its payroll process to a third-party service provider. an audit team was scheduled to audit payroll controls in the annual audit plan prepared prior to the outsourcing. what action should the audit team take, considering the outsourcing decision? a. cancel the engagement, because the processing is being performed outside the organization b. review only the controls over payments to the third-party provider based on the contract c. review only the company's controls over data sent to and received from the third-party service provider d. review the controls over payroll processing in both the company and the third-party service provider

b

a major upgrade to an important information system would most likely represent a high: a. external risk factor b. internal risk factor c. other risk factor d. likelihood of future systems problems

b

a payroll clerk increased the hourly pay rate of a friend and shared the resulting overpayment with the friend. which of the following controls would have best served to prevent this fraud? a. requiring that all changes to pay records be recorded on a standard form b. limiting the ability to make changes in payroll system personnel information to authorized HR department supervisors c. periodically reconciling pay rates per personnel records with those of the payroll system d. monitoring payroll costs by department supervisors monthly

b

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

b

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

c

an internal auditor plans to conduct an audit of the adequacy 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

b

an internet firewall is designed to provide protection against: a. computer viruses b. unauthorized access from outsiders c. lightning strikes and power surges d. arson

b

an organization that manufactures and sells computers is trying to boost sales between now and the end of the year. it decides to offer its sales representatives a bonus based on the number of units they deliver to customers before the end of the year. the price of all computers is determined by the vice president of sales and cannot be changed by sales representatives. which of the following presents the greatest reason a sales representative may commit fraud with this incentive program? a. sales representative may sell units that have a lower margin than other units b. customers have the right to return a laptop for up to 90 days after purchase c. the units delivered may be defective d. the customers may not pay for the computers timely

d

an organization's IT governance committee has several important responsibilities. which of the following is not normally such a responsibility? a. aligning investments in IT with business strategies b. overseeing changes to IT systems c. monitoring IT security procedures d. designing IT application-based controls

a

appropriate internal control for a multinational corporation'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

b

coso's internal control framework consists of five internal control components and 17 principles for achieving effective internal control. which of the following is/are principles? i. the organization demonstrates a commitment to integrity and ethical values ii. monitoring activities iii. a level of assurance that is supported by generally accepted auditing procedures and judgments iv. a body of guiding principles that form a template against which organizations can evaluate a multitude of business practices v. the organization selects, develops, and performs ongoing and/or separate evaluations to ascertain whether the components of internal control are present and functioning a. II only b. I and V only c. II and IV only d. I, II, III, IV, and V

d

determining that engagement objectives have been met is ultimately the responsibility of the: a. internal auditor b. audit committee c. internal audit supervisor d. CAE

b

from an organization's standpoint, because internal auditors are seen to be "internal control experts," they also are: a. fraud risk management process owners, and hence, the first and most important line of defense against fraudulent financial reporting or asset misappropriation b. the best resource for audit committees, management, and others to consult in-house when setting up anti-fraud programs and controls, even if they may not have any fraud investigation experience c. the best candidates to lead an investigation of a fraud incident involving the potential violation of laws and regulations d. the primary decision-maker in terms of determining punishment or other consequences for fraud perpetrators

c

how should an organization handle an anonymous accusation from an employee that a supervisor in the organization has manipulated time reports? a. assign a staff internal auditor to review all time reports for the past six months in the supervisor's area b. make a record of the accusation but do nothing, as anonymous accusations are typically not true c. assess the facts provided by the anonymous party against pre-established criteria to determine whether a formal investigation is warranted d. turn the issue over to the HR department because this type of anonymous accusation is usually just a human resource issue

b

if a risk appears in the bottom right of quadrant II in the risk control map, it means that: a. there is an appropriate balance between risk and control b. the controls may be excessive relative to the risk c. the controls may be inadequate relative to the risk d. there is not enough information to make a judgment

a

if a risk appears in the middle of quadrant IV in the risk control map, it means that: a. there is an appropriate balance between risk and control b. the controls may be excessive relative to the risk c. the controls may be inadequate relative to the risk d. there is not enough information to make a judgment

c

if a sales transaction record was rejected during input because the customer account number entered was not listed in the customer master file, the error was most likely detected by a: a. completeness check b. limit check c. validity check d. reasonableness check

b

in a risk by process matrix, a process that helps to manage a risk indirectly would be shown to have: a. a key link b. a secondary link c. an indirect link d. no link at all

d

in assessing organizational risk in a manufacturing organization, which of the following would have the greatest long-range impact on the organization? a. advertising budget b. production scheduling c. inventory policy d. product quality

b

internal auditors often prepare process maps and reference portions of these maps to narrative descriptions of certain activities. this is an appropriate procedure to: a. determine the ability of the activities to produce reliable information b. obtain the understanding necessary to test the process c. document that the process meets internal audit standards d. determine whether the process meets established management objectives

b

predication is a technical term that refers to: a. the ability of internal auditors to predict fraud successfully b. the ability of a fraud examiner to commence an investigation if a form of evidence exists that fraud has occurred c. the activities of fraud perpetrators in concealing their tracks so that fraud is covered up and may not be discovered d. management's analysis of fraud risks so they can put in place effective anti-fraud programs and controls

c

reasonable assurance, as it pertains to internal controls, means that: a. the objectives of internal control vary depending on the method of data processing used b. a well-designed system of internal controls will prevent or detect all errors and fraud c. inherent limitations of internal control preclude a system of internal control from providing absolute assurance that objectives will be achieved d. management cannot override controls, and employees cannot circumvent controls through collusion

c

the control that would most likely 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 of undelivered checks to the cashier c. require supervisory approval of employee time cards d. periodically witness the distribution of payroll checks

c

the internal audit function's responsibilities with respect to fraud are limited to: a. the organization's operational and compliance activities only because financial reporting matters are the responsibility of the independent outside auditor b. monitoring any calls received through the organization's whistleblower hotline but not necessarily conducting a follow-up investigation c. being aware of fraud indicators, including those relating to financial reporting fraud, but not necessarily possessing the expertise of a fraud investigation specialist d. ensuring that all employees have received adequate fraud awareness training

b

the possibility of someone maliciously shutting down an information system is most directly an element of: a. availability risk b. access risk c. confidentiality risk d. deployment risk

a

the purpose of logical security controls is to: a. restrict access to data b. limit access to hardware c. record processing results d. ensure complete and accurate processing of data

a

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

c

the risk assessment component of internal control involves the: a. independent outside auditor's assessment of residual risk b. internal audit function's assessment of control deficiencies c. organization's identification and analysis of the risks that threaten the achievement of its objectives d. organization's monitoring of financial information for potential material misstatements

c

the software that manages the interconnectivity of the system hardware devices is the: a. application software b. utility software c. operating system software d. database management system software

c

what fraud schemes were reported to be most common in the ACFE's 2016 Report to the Nations? a. corruption b. fraudulent billing c. misappropriation of assets by employees d. inappropriately recording revenues in published financial results

b

what is a business process? a. how management plans to achieve the organization's objectives b. the set of connected activities linked with each other for the purpose of achieving an objective or goal c. a group of interacting, interrelated, or interdependent elements forming a complex whole d. a finite endeavor (having specific start and completion dates) undertaken to create a unique product or service that brings about beneficial change or added value

c

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

which of the following best describes continuous auditing? a. development of computer-assisted audit techniques (CAATs) b. oversight of continuous monitoring c. the use of continuous risk assessment, continuous controls assessment, and assessment of continuous monitoring d. the ability of internal auditors to continually perform auditing steps

a

which of the following best exemplifies a control activity referred to as independent verification? a. reconciliation of bank accounts by someone who does not handle cash or record cash transactions b. identification badges and security codes used to restrict entry to the production facility c. accounting records and documents that provide a trail of sales and cash receipt transactions d. separating the physical custody of inventory from inventory accounting

b

which of the following best illustrates the use of EDI? a. purchasing merchandise from a company's internet site b. computerized placement of a purchase order from a customer to its supplier c. transfer of data from a desktop computer to a database server d. withdrawing cash from an ATM

c

which of the following circumstances would concern the internal auditor the most? a. a risk in the lower left corner of quadrant I b. a risk in the lower right corner of quadrant II c. a risk in the upper left corner of quadrant III d. a risk in the upper right corner of quadrant IV

a

which of the following is an example of misappropriation of assets? a. a small amount of petty cash is stolen b. a journal entry is modified to improve reported financial results c. a foreign official is bribed by the chief operating officer (COO) to facilitate approval of a new product d. a duplicate bill is sent to a customer in hopes that they will pay it twice

d

which of the following is not a typical "rationalization" of a fraud perpetrator? a. it's in the organization's best interest b. the company owes me because im underpaid c. i want to get back at my boss (revenge) d. im smarter than the rest of them

d

which of the following is not an example of a fraud prevention program element? a. background investigations of new employees b. exit interviews of departing employees c. establishing authority limits related to purchasing commitments d. analyzing cash disbursements to determine whether any duplicate payments have been made

d

which of the following is not something all levels of employees should do? a. understand their role within the internal control framework b. have a basic understanding of fraud and be aware of the red flags c. report suspicions of incidences of fraud d. investigate suspicious activities that they believe may be fraudulent

d

which of the following is true regarding business process outsourcing? a. outsourcing a core, high-risk business process reduces the overall operational risk b. outsourced processes should not be included in the internal audit universe c. the independent outside auditor is required to review all significant outsourced business processes d. management's controls to ensure the outsourcing provider meets contractual performance requirements should be tested by the internal audit function

c

which of the following types of companies would most likely need the strongest anti-fraud controls? a. a manufacturer of popular athletic shoes b. a grocery store c. a bank d. an internet-based electronics retailer

c

who has primary responsibility 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