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

An organization has implemented a new automated payroll system that contains a table of pay rates that are matched to employee job classifications. Which control should an internal auditor suggest in order to ensure that the table is updated correctly, and is used only for valid pay changes?

Which of the following components influences the risk consciousness of an organization's people and is the basis for all other components of enterprise risk management?

An organization's chief audit executive (CAE) determines that the internal audit staff does not have the requisite skills to conduct an audit of the financial derivatives area. Which of the following would be the best course of action for the CAE to follow?

Which of the following is not a standard technique that the chief audit executive (CAE) would use to provide evidence of supervisory review of working papers?

Which of the following actions indicates a lack of due professional care by an internal auditor performing an audit of a store's cash function?

Which of the following is a weakness of observation as audit evidence?

During an audit engagement, an internal auditor finds that management is not complying with previous commitments made to the external auditors. However, the auditor determines management's actions to be justified due to significant changes in the business. The best course of action for the auditor to take would be to:

An internal auditor would most likely judge an error in an account balance to be material if the error involves:

Which of the following is the responsibility of an internal auditor? 1. Assist operating management in implementing audit recommendations. 2. Provide management with value-added analysis to improve operations. 3. Become an advocate for changes to the internal audit activity charter. 4. Disclose non-financial risks that may be identified during the course of an engagement.

Internal control processes in an organization require that all investments exceeding $20, 000 receive authorization from both the president and treasurer. After conducting a sample of these transactions, an auditor determined that 10 of the 500 investments in the sample had not included both required authorizations. The sample has a five percent acceptable error rate. Based on this sample, which of the following actions should the auditor take?

During the planning phase of an audit, an internal auditor preliminarily concluded that the controls for a process were adequately designed to manage the associated risk. Under what conditions might this preliminary assessment subsequently prove to be unreliable?

According to the Standards, which of the following statements best describes the required content of the chief audit executive's (CAE) report to senior management and the board on the internal audit activity (IAA)?

Which of the following factors related to an organization's performance management system would not contribute to the organization's success?

A fast-food company is developing a computer simu-lation involving arrival time at a drive-through restaurant. The distribution for arrival times is: Time Single-Digit Random Between Arrivals Probability Number Assigned 2 minutes 0.1 0 3 minutes 0.2 1, 2 4 minutes 0.3 3, 4, 5 5 minutes 0.4 6, 7, 8, 9 Six random numbers are selected to represent the arrival of six cars: 1, 6, 9, 0, 5, 6. What is the mean time between arrivals in this run of the simu-lation model?

Noncompliance with which of the following would cause a control deficiency related to privacy protection practices?

After completing a net present value (NPV) calculation on a proposed project, an analyst explores the change in NPV with changes in the interest rate. This additional analysis is referred to as:

The chairperson of an organization's audit committee has obtained a risk management report that identifies significant industry concerns that impact the organization. The chairperson has asked the chief audit executive (CAE) to review these concerns and advise if they are relevant to the organization. How should the CAE respond?

Which of the following describes a control weakness?

An employee is more likely to commit fraud if which of the following red flags are present? 1. The employee believes that he is being underpaid and deserves a higher salary. 2. The employee is close to retirement and has expressed a desire to take an expensive trip around the world. 3. The employee has personal financial problems and seems very unhappy. 4. The employee is spending much more time at the office than usual and has been asking about opportunities for professional advancement.

Which of the following would be the best example of a monitoring control for a chain of restaurants?