Question 1

Which of the following is the best method for testing the accuracy of a computer program's calculation of shipping charges?

Accepted Answer

A)  Use either test data or parallel simula-tion to test the computer program. 
B)  Use generalized audit software to select a monetary-unit sample of invoices that have been billed to customers. 
C)  Select transactions from invoices with shipping charges using difference estimation. 
D)  Select transactions from invoices with shipping charges using discovery sampling. 
A)  Use either test data or parallel simula-tion to test the computer program. 
B)  Use generalized audit software to select a monetary-unit sample of invoices that have been billed to customers. 
C)  Select transactions from invoices with shipping charges using difference estimation. 
D)  Select transactions from invoices with shipping charges using discovery sampling.

Question 2

An audit to test the system of controls over the purchase, distribution, and use of radioactive material is being conducted at a company's plants. The process is well documented, and employees in the safety department are very familiar with the department's procedures. Since the purchasing and facilities departments are involved in the process, the auditor is considering reviewing their radioactive material-handling procedures as well. The auditor should:

Accepted Answer

A)  Have confidence in the rigorous and detailed safety department procedures, since that department has the main responsibility for radiation safety, and should not use audit time to review other departments. 
B)  Adjust the engagement schedule and budget, if needed, and interview the appropriate individuals in the purchasing and facilities departments to ascertain whether additional controls exist that complement those identified within the safety department. 
C)  Test the controls identified within the safety department; if results are unfavorable, the auditor should consider whether to involve the other departments. 
D)  Defer questions regarding purchasing, facilities, and other departments until audit projects can be scheduled for those departments. 
A)  Have confidence in the rigorous and detailed safety department procedures, since that department has the main responsibility for radiation safety, and should not use audit time to review other departments. 
B)  Adjust the engagement schedule and budget, if needed, and interview the appropriate individuals in the purchasing and facilities departments to ascertain whether additional controls exist that complement those identified within the safety department. 
C)  Test the controls identified within the safety department; if results are unfavorable, the auditor should consider whether to involve the other departments. 
D)  Defer questions regarding purchasing, facilities, and other departments until audit projects can be scheduled for those departments.

Question 3

According to IIA guidance, which of the following statements is correct concerning the knowledge, skills, and competencies required to fulfill the responsibilities of the internal audit activity (IAA)?

Accepted Answer

A)  The IAA must collectively possess the knowledge, skills, and competencies needed to perform all engagements. 
B)  Each internal auditor in the IAA must possess the competencies required to detect and investigate fraudulent transactions. 
C)  The IAA must not decline any engagement based solely on a lack the necessary knowledge, skills, and competencies to perform it. 
D)  The competencies of external service providers must be assessed by the chief audit executive before the IAA can use external service providers' work. 
A)  The IAA must collectively possess the knowledge, skills, and competencies needed to perform all engagements. 
B)  Each internal auditor in the IAA must possess the competencies required to detect and investigate fraudulent transactions. 
C)  The IAA must not decline any engagement based solely on a lack the necessary knowledge, skills, and competencies to perform it. 
D)  The competencies of external service providers must be assessed by the chief audit executive before the IAA can use external service providers' work.

Question 4

In the annual audit of the financial statements of a company with high inherent risk and a very strong control system, the external auditor may be able to allow detection risk to rise because.

Accepted Answer

A)  Audit risk has been reduced. 
B)  Control risk has been assessed at a lower level. 
C)  The company's operations are very susceptible to misstatements. 
D)  Whenever inherent risk is high, control risk is disregarded. 
A)  Audit risk has been reduced. 
B)  Control risk has been assessed at a lower level. 
C)  The company's operations are very susceptible to misstatements. 
D)  Whenever inherent risk is high, control risk is disregarded.

Question 5

Which of the following is not a benefit of using information technology in solving audit problems?

Accepted Answer

A)  It helps reduce audit risk. 
B)  It improves the timeliness of the audit engagement. 
C)  It increases audit opportunities. 
D)  It improves the auditor's judgment. 
A)  It helps reduce audit risk. 
B)  It improves the timeliness of the audit engagement. 
C)  It increases audit opportunities. 
D)  It improves the auditor's judgment.

Question 6

At the beginning of fieldwork in an audit of investments, an internal auditor noted that the interest rate had declined significantly since the engagement work program was created. The auditor should:

Accepted Answer

A)  Proceed with the existing program since this was the original scope of work that was approved. 
B)  Modify the audit program and proceed with the engagement. 
C)  Consult with management to verify the interest rate change and proceed with the engagement. 
D)  Determine the effect of the interest rate change and whether the program should be modified. 
A)  Proceed with the existing program since this was the original scope of work that was approved. 
B)  Modify the audit program and proceed with the engagement. 
C)  Consult with management to verify the interest rate change and proceed with the engagement. 
D)  Determine the effect of the interest rate change and whether the program should be modified.

Question 7

An internal auditor is assigned to conduct an audit of security for a local area network (LAN) in the finance department of the organization. Investment decisions, including the use of hedging strategies and financial derivatives, use data and financial models which run on the LAN. The LAN is also used to download data from the mainframe to assist in decisions. Which of the following should be considered outside the scope of this security audit engagement?

Accepted Answer

A)  Investigation of the physical security over access to the components of the LAN. 
B)  The ability of the LAN application to identify data items at the field or record level and implement user access security at that level. 
C)  Interviews with users to determine their assessment of the level of security in the system and the vulnerability of the system to compromise. 
D)  The level of security of other LANs in the company which also utilize sensitive data. 
A)  Investigation of the physical security over access to the components of the LAN. 
B)  The ability of the LAN application to identify data items at the field or record level and implement user access security at that level. 
C)  Interviews with users to determine their assessment of the level of security in the system and the vulnerability of the system to compromise. 
D)  The level of security of other LANs in the company which also utilize sensitive data.

Question 8

A staff auditor, nearly finished with an audit engagement, discovers that the director of marketing has a gambling habit. The gambling issue is not directly related to the existing engagement, and there is pressure to complete the current engagement. The auditor notes the problem and forwards the information to the chief audit executive, but performs no further follow-up. Which of the following statements is true about the auditor's actions?

Accepted Answer

A)  They are in violation of the IIA Code of Ethics because the auditor withheld meaningful information. 
B)  They are in violation of the Standards because the auditor did not properly follow up on a red flag that might indicate the existence of fraud. 
C)  They are in violation of neither the IIA Code of Ethics nor the Standards. 
D)  They are not in violation of the Standards but are in violation of the IIA Code of Ethics. 
A)  They are in violation of the IIA Code of Ethics because the auditor withheld meaningful information. 
B)  They are in violation of the Standards because the auditor did not properly follow up on a red flag that might indicate the existence of fraud. 
C)  They are in violation of neither the IIA Code of Ethics nor the Standards. 
D)  They are not in violation of the Standards but are in violation of the IIA Code of Ethics.

Question 9

Which of the following is an advantage of email surveys compared to face-to-face interviews?

Accepted Answer

A)  They are less expensive. 
B)  They have higher rates of response. 
C)  Survey designers are able to use a broader variety of questions. 
D)  Respondents can easily get clarification on questions from survey designers or interviewers. 
A)  They are less expensive. 
B)  They have higher rates of response. 
C)  Survey designers are able to use a broader variety of questions. 
D)  Respondents can easily get clarification on questions from survey designers or interviewers.

Question 10

Which of the following statements is true about visual observation during an audit engagement? 1. Visual observations should not be documented as the facts have not been substantiated. 2. Complex conditions observed should be verified prior to communicating observations to management. 3. Visual observations can be used to detect ineffective controls, idle resources, and safety hazards. 4. Visual observation can be used during both preliminary survey and fieldwork stages of the audit engagement.

Accepted Answer

A)  1 and 2 only 
B)  3 and 4 only 
C)  1, 2, and 4 only 
D)  2, 3, and 4 only 
A)  1 and 2 only 
B)  3 and 4 only 
C)  1, 2, and 4 only 
D)  2, 3, and 4 only

Question 11

What would a chief audit executive most likely recommend that an internal auditor do to prepare for an increased demand in advisory services?

Accepted Answer

A)  Participate in continuing professional development activities, such as training courses or rotations into other business units. 
B)  Review records from prior engagements to determine how best to align the current engagement activities with prior activities. 
C)  Expand the scope of every future internal audit activity to all parts of the organization, rather than only the departments identified in the activity's charter. 
D)  Specialize in one specific aspect of internal auditing, such as risk assessment or information technology controls. 
A)  Participate in continuing professional development activities, such as training courses or rotations into other business units. 
B)  Review records from prior engagements to determine how best to align the current engagement activities with prior activities. 
C)  Expand the scope of every future internal audit activity to all parts of the organization, rather than only the departments identified in the activity's charter. 
D)  Specialize in one specific aspect of internal auditing, such as risk assessment or information technology controls.

Question 12

A chief audit executive (CAE) is selecting an internal audit team to perform an audit engagement that requires a high level of knowledge in the areas of finance, investment portfolio management, and taxation. If neither the CAE nor the existing internal audit staff possess the required knowledge, which of the following actions should the CAE take?

Accepted Answer

A)  Postpone the audit until the CAE hires internal audit staff with the required knowledge. 
B)  Ask the audit committee to decide the course of action. 
C)  Select the most experienced auditors in the department to perform the engagement. 
D)  Hire consultants who possess the required knowledge to perform the engagement. 
A)  Postpone the audit until the CAE hires internal audit staff with the required knowledge. 
B)  Ask the audit committee to decide the course of action. 
C)  Select the most experienced auditors in the department to perform the engagement. 
D)  Hire consultants who possess the required knowledge to perform the engagement.

Question 13

To ensure that due professional care has been taken during an audit engagement, an internal auditor should always:

Accepted Answer

A)  Ensure that all financial information related to the engagement is included in the audit plan and examined for irregularities. 
B)  Document all audit tests completely. 
C)  Consider the possibility of noncompliance or irregularities at all times during an engagement. 
D)  Notify the audit committee of any noncompliance or irregularity discovered during an engagement. 
A)  Ensure that all financial information related to the engagement is included in the audit plan and examined for irregularities. 
B)  Document all audit tests completely. 
C)  Consider the possibility of noncompliance or irregularities at all times during an engagement. 
D)  Notify the audit committee of any noncompliance or irregularity discovered during an engagement.

Question 14

What is the primary purpose of a risk management program?

Accepted Answer

A)  Reduce risk to a tolerable level. 
B)  Reduce all risks regardless of costs. 
C)  Transfer all risks to external third parties. 
D)  Identify every significant risk to avoid it. 
A)  Reduce risk to a tolerable level. 
B)  Reduce all risks regardless of costs. 
C)  Transfer all risks to external third parties. 
D)  Identify every significant risk to avoid it.

Question 15

Which type of documentary evidence gathered by an organization's internal auditors has the highest level of reliability?

Accepted Answer

A)  Inventory test counts. 
B)  Bank statements. 
C)  Remittance advices. 
D)  Written policy statements. 
A)  Inventory test counts. 
B)  Bank statements. 
C)  Remittance advices. 
D)  Written policy statements.

Question 16

Which of the following actions would compromise an internal auditor's objectivity?

Accepted Answer

A)  Preparing bank reconciliations. 
B)  Reviewing procedures before they are implemented. 
C)  Auditing an activity for which the auditor had responsibility two years ago. 
D)  Receiving a promotional pen from a supply available to all employees. 
A)  Preparing bank reconciliations. 
B)  Reviewing procedures before they are implemented. 
C)  Auditing an activity for which the auditor had responsibility two years ago. 
D)  Receiving a promotional pen from a supply available to all employees.

Question 17

Which of the following would be a violation of the IIA Code of Ethics?

Accepted Answer

A)  Reporting information that could be damaging to the organization, at the request of a court of law. 
B)  Including an issue in the final audit report after management has resolved the issue. 
C)  Participating in an audit engagement for which the auditor does not have the necessary experience or training. 
D)  Accepting a gift that is a commercial advertisement available to the public. 
A)  Reporting information that could be damaging to the organization, at the request of a court of law. 
B)  Including an issue in the final audit report after management has resolved the issue. 
C)  Participating in an audit engagement for which the auditor does not have the necessary experience or training. 
D)  Accepting a gift that is a commercial advertisement available to the public.

Question 18

Which of the following best describes the misdirection of payments on accounts receivable to an employee's bank account?

Accepted Answer

A)  Fraud open on the books. 
B)  Fraud hidden on the books. 
C)  Fraud off the books. 
D)  Fraud on the balance sheet. 
A)  Fraud open on the books. 
B)  Fraud hidden on the books. 
C)  Fraud off the books. 
D)  Fraud on the balance sheet.

Question 19

Which of the following techniques would best assist an internal auditor in evaluating the efficiency of a wholesale grocery distributor`s process to fill and package orders for shipping?

Accepted Answer

A)  A Bedford analysis of orders filled to average delivery times. 
B)  Decision trees rating actual performance against requirements. 
C)  Queuing theory to assess potential bottlenecks in the process. 
D)  A program evaluation and review technique chart. 
A)  A Bedford analysis of orders filled to average delivery times. 
B)  Decision trees rating actual performance against requirements. 
C)  Queuing theory to assess potential bottlenecks in the process. 
D)  A program evaluation and review technique chart.

Question 20

All of the following would normally be involved in preparing for and carrying out the internal audit activity's annual plan except:

Accepted Answer

A)  Establishing policies and procedures for workpapers and referencing. 
B)  Providing periodic activity reports to the audit committee on audit engagements in progress. 
C)  Assessing the amount of risk in major departments. 
D)  Training audit staff on appropriate audit methodologies for addressing any newly identified risks. 
A)  Establishing policies and procedures for workpapers and referencing. 
B)  Providing periodic activity reports to the audit committee on audit engagements in progress. 
C)  Assessing the amount of risk in major departments. 
D)  Training audit staff on appropriate audit methodologies for addressing any newly identified risks.

Which of the following is the best method for testing the accuracy of a computer program's calculation of shipping charges?

According to IIA guidance, which of the following statements is correct concerning the knowledge, skills, and competencies required to fulfill the responsibilities of the internal audit activity (IAA)?

In the annual audit of the financial statements of a company with high inherent risk and a very strong control system, the external auditor may be able to allow detection risk to rise because.

Which of the following is not a benefit of using information technology in solving audit problems?

At the beginning of fieldwork in an audit of investments, an internal auditor noted that the interest rate had declined significantly since the engagement work program was created. The auditor should:

Which of the following is an advantage of email surveys compared to face-to-face interviews?

What would a chief audit executive most likely recommend that an internal auditor do to prepare for an increased demand in advisory services?

To ensure that due professional care has been taken during an audit engagement, an internal auditor should always:

What is the primary purpose of a risk management program?

Which type of documentary evidence gathered by an organization's internal auditors has the highest level of reliability?

Which of the following actions would compromise an internal auditor's objectivity?

Which of the following would be a violation of the IIA Code of Ethics?

Which of the following best describes the misdirection of payments on accounts receivable to an employee's bank account?

Which of the following techniques would best assist an internal auditor in evaluating the efficiency of a wholesale grocery distributor`s process to fill and package orders for shipping?

All of the following would normally be involved in preparing for and carrying out the internal audit activity's annual plan except:

Certified Financial Services Auditor

Certified Government Auditing Professional

Conducting the Internal Audit Engagement

Business Analysis and Information Technology

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Exam 3: The Internal Audit Activity Role in Governance, Risk, and Control

Which of the following is the best method for testing the accuracy of a computer program's calculation of shipping charges?

According to IIA guidance, which of the following statements is correct concerning the knowledge, skills, and competencies required to fulfill the responsibilities of the internal audit activity (IAA)?

In the annual audit of the financial statements of a company with high inherent risk and a very strong control system, the external auditor may be able to allow detection risk to rise because.

Which of the following is not a benefit of using information technology in solving audit problems?

At the beginning of fieldwork in an audit of investments, an internal auditor noted that the interest rate had declined significantly since the engagement work program was created. The auditor should:

Which of the following is an advantage of email surveys compared to face-to-face interviews?

What would a chief audit executive most likely recommend that an internal auditor do to prepare for an increased demand in advisory services?

To ensure that due professional care has been taken during an audit engagement, an internal auditor should always:

What is the primary purpose of a risk management program?

Which type of documentary evidence gathered by an organization's internal auditors has the highest level of reliability?

Which of the following actions would compromise an internal auditor's objectivity?

Which of the following would be a violation of the IIA Code of Ethics?

Which of the following best describes the misdirection of payments on accounts receivable to an employee's bank account?

Which of the following techniques would best assist an internal auditor in evaluating the efficiency of a wholesale grocery distributor`s process to fill and package orders for shipping?

All of the following would normally be involved in preparing for and carrying out the internal audit activity's annual plan except:

Certified Financial Services Auditor

Certified Government Auditing Professional

Conducting the Internal Audit Engagement

Business Analysis and Information Technology

Filters