Question 1

Which of the following best ensures an internal audit activity has the ability to render impartial and unbiased assessments?

Accepted Answer

A)  Organizational status and objectivity. 
B)  Supervision of the chief audit executive (CA
E)  by senior management. 
C)  Organizational knowledge and skills. 
D)  CAE certification. 
A)  Organizational status and objectivity. 
B)  Supervision of the chief audit executive (CA
E)  by senior management. 
C)  Organizational knowledge and skills. 
D)  CAE certification.

Question 2

According to the COSO Enterprise Risk Management - Integrated Framework, which of the following statements is true regarding the role of risk appetite in an organization?

Accepted Answer

A)  Risk appetite reflects the organization's risk philosophy and influences its operating style. 
B)  A high risk appetite may limit capital investment in high risk areas. 
C)  Risk appetite is determined in part by how an entity allocates its resources. 
D)  Risk appetite is often best measured in the same units as its related objective. 
A)  Risk appetite reflects the organization's risk philosophy and influences its operating style. 
B)  A high risk appetite may limit capital investment in high risk areas. 
C)  Risk appetite is determined in part by how an entity allocates its resources. 
D)  Risk appetite is often best measured in the same units as its related objective.

Question 3

Which of the following results from computer assisted audit techniques provides the most significant indication that additional audit work is needed?

Accepted Answer

A)  Several exact matches were found when vendor and employee addresses were compared. 
B)  The sum of credit entries on the bank statement did not equal the sum of collections for the same period. 
C)  Sorting the check register file by vendor name identified missing sequences of check numbers. 
D)  Matching the accounts payable transaction file with the purchase order request file resulted in many differences between the person requesting the purchase order and the person authorizing payment. 
A)  Several exact matches were found when vendor and employee addresses were compared. 
B)  The sum of credit entries on the bank statement did not equal the sum of collections for the same period. 
C)  Sorting the check register file by vendor name identified missing sequences of check numbers. 
D)  Matching the accounts payable transaction file with the purchase order request file resulted in many differences between the person requesting the purchase order and the person authorizing payment.

Question 4

An internal audit charter should do which of the following?

Accepted Answer

A)  Outline the schedule of future audits. 
B)  Define the scope of internal audit activities. 
C)  Establish the size of the internal audit activity. 
D)  Communicate the internal audit activity's goals. 
A)  Outline the schedule of future audits. 
B)  Define the scope of internal audit activities. 
C)  Establish the size of the internal audit activity. 
D)  Communicate the internal audit activity's goals.

Question 5

Internal auditors can benefit from a strong relationship with the external auditors because external auditors can:

Accepted Answer

A)  Provide internal auditors with an independent and knowledgeable viewpoint. 
B)  Concur with the internal auditors' reports and thus improve the quality of assurance provided to management. 
C)  Increase the effectiveness of internal control sampling techniques. 
D)  Assist the internal auditor by providing information obtained from similar audits with other clients. 
A)  Provide internal auditors with an independent and knowledgeable viewpoint. 
B)  Concur with the internal auditors' reports and thus improve the quality of assurance provided to management. 
C)  Increase the effectiveness of internal control sampling techniques. 
D)  Assist the internal auditor by providing information obtained from similar audits with other clients.

Question 6

Which of the following is a component of the internal audit value proposition endorsed by IIA guidance?

Accepted Answer

A)  Insight. 
B)  Independence. 
C)  Integrity. 
D)  Competency. 
A)  Insight. 
B)  Independence. 
C)  Integrity. 
D)  Competency.

Question 7

During an internal audit, the internal auditor compares the employee turnover rate in the area being audited with the employee turnover rate in the organization as a whole. This is an example of which of the following analytical auditing procedures?

Accepted Answer

A)  Reasonableness test. 
B)  Regression analysis. 
C)  Benchmarking. 
D)  Trend analysis. 
A)  Reasonableness test. 
B)  Regression analysis. 
C)  Benchmarking. 
D)  Trend analysis.

Question 8

How should management obtain assurance that employees are complying with the organization's security policy?

Accepted Answer

A)  Regularly conduct independent reviews of employees' security practices. 
B)  Routinely survey staff so that information related to security practices can be submitted anonymously. 
C)  Rely on exception reports to identify errors. 
D)  Enforce a policy that requires all employees to sign a statement that they will adhere to the organization's security policies. 
A)  Regularly conduct independent reviews of employees' security practices. 
B)  Routinely survey staff so that information related to security practices can be submitted anonymously. 
C)  Rely on exception reports to identify errors. 
D)  Enforce a policy that requires all employees to sign a statement that they will adhere to the organization's security policies.

Question 9

An objective for an audit of a medical research corporation is to evaluate management's controls to ensure that timely reports are submitted to sponsors of contracted research projects. In planning the audit to achieve this objective, the auditor should begin by:

Accepted Answer

A)  Reviewing policies and procedures. 
B)  Interviewing a group of research managers. 
C)  Observing report preparation in a number of laboratories. 
D)  Sending a questionnaire to a sample of research sponsors. 
A)  Reviewing policies and procedures. 
B)  Interviewing a group of research managers. 
C)  Observing report preparation in a number of laboratories. 
D)  Sending a questionnaire to a sample of research sponsors.

Question 10

Which of the following is least likely to be considered material in an audit of a medium-sized organization?

Accepted Answer

A)  A $1, 000 overstatement of the accrued-vacation payable account. 
B)  A violation of a government statute. 
C)  Fraud resulting in a cash loss to the organization. 
D)  An underpayment to the employee pension fund. 
A)  A $1, 000 overstatement of the accrued-vacation payable account. 
B)  A violation of a government statute. 
C)  Fraud resulting in a cash loss to the organization. 
D)  An underpayment to the employee pension fund.

Question 11

While conducting an audit, an internal auditor notices an unusual increase in sales among a small number of units within the organization. The units also experienced persistent negative cash flows despite reported earnings and earnings growth. Which type of fraud do the auditor's findings most likely indicate?

Accepted Answer

A)  Employee collusion with customer organizations. 
B)  Improper asset valuation. 
C)  Inventory theft. 
D)  Fictitious revenues. 
A)  Employee collusion with customer organizations. 
B)  Improper asset valuation. 
C)  Inventory theft. 
D)  Fictitious revenues.

Question 12

The chief audit executive (CAE) of a mid-sized pharmaceutical organization has operational responsibility for the regulatory compliance function. The audit committee requests an assessment of regulatory compliance. According to IIA guidance, which of the following is the CAE's best course of action?

Accepted Answer

A)  Have a proficient internal audit staff member perform the assessment and disclose the impairment in the audit report and to the board. 
B)  Have a regulatory compliance staff member perform a self-assessment, to be reviewed by a proficient internal auditor. 
C)  Have a proficient internal audit staff member perform the audit and report the results of the assessment directly to senior management and the board. 
D)  Contract with a third-party entity or external auditor to complete the assessment and report the results to senior management and the board. 
A)  Have a proficient internal audit staff member perform the assessment and disclose the impairment in the audit report and to the board. 
B)  Have a regulatory compliance staff member perform a self-assessment, to be reviewed by a proficient internal auditor. 
C)  Have a proficient internal audit staff member perform the audit and report the results of the assessment directly to senior management and the board. 
D)  Contract with a third-party entity or external auditor to complete the assessment and report the results to senior management and the board.

Question 13

The percentage of orders that are rush orders and the percentage of returns to total orders are examples of which of the following types of control activities?

Accepted Answer

A)  Quality control monitoring. 
B)  Direct functional management. 
C)  Benchmarking. 
D)  Performance indicators. 
A)  Quality control monitoring. 
B)  Direct functional management. 
C)  Benchmarking. 
D)  Performance indicators.

Question 14

Reportable audit findings must be:

Accepted Answer

A)  Documented by facts. II. Supported by relevant evidence. III. Agreed to by management of the audited area. IV. Convincing enough to compel corrective action. 
B)  I and IV only 
C)  II and III only 
D)  I, II, and IV only 
E)  I, II, III, and IV. 
A)  Documented by facts. II. Supported by relevant evidence. III. Agreed to by management of the audited area. IV. Convincing enough to compel corrective action. 
B)  I and IV only 
C)  II and III only 
D)  I, II, and IV only 
E)  I, II, III, and IV.

Question 15

A medical insurance provider uses an electronic claims-submission process and suspects that a number of physicians have submitted claims for treatments that were not performed. Which of the following control procedures would be most effective to detect this type of fraud?

Accepted Answer

A)  Require the physician to submit a signed statement attesting that the treatments had been performed. 
B)  Send confirmations to the physicians, requesting them to verify the exact nature of the claims submitted to the insurance provider. 
C)  Develop an integrated test facility and submit false claims to verify that the system is detecting such claims on a consistent basis. 
D)  Use computer software to identify abnormal claims based on the insured's age and medical history. 
A)  Require the physician to submit a signed statement attesting that the treatments had been performed. 
B)  Send confirmations to the physicians, requesting them to verify the exact nature of the claims submitted to the insurance provider. 
C)  Develop an integrated test facility and submit false claims to verify that the system is detecting such claims on a consistent basis. 
D)  Use computer software to identify abnormal claims based on the insured's age and medical history.

Question 16

When auditing the award of a major contract, which of the following should an internal auditor suspect as a red flag for a bidding fraud scheme? 1. Subsequent change orders increase requirements for low-bid items. 2. Material contract requirements are different on the actual contract than on the request for bids. 3. A high percentage of employees are charged to indirect accounts. 4. Losing bidders are hired as subcontractors.

Accepted Answer

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

Question 17

Which of the following are acceptable resources for a chief audit executive to use when developing a staffing plan? 1. Co-sourcing arrangements. 2. Employees from other areas of the organization. 3. The organization's external auditors. 4. The organization's audit committee members.

Accepted Answer

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

Question 18

Which of the following represents the most useful function of inventory turnover analysis?

Accepted Answer

A)  Identifying excess inventory, including obsolete inventory. 
B)  Determining the best supplier of raw materials based on cost comparison. 
C)  Creating new staffing positions for inventory support. 
D)  Developing more efficient methods for manufacturing finished products. 
A)  Identifying excess inventory, including obsolete inventory. 
B)  Determining the best supplier of raw materials based on cost comparison. 
C)  Creating new staffing positions for inventory support. 
D)  Developing more efficient methods for manufacturing finished products.

Question 19

Which of the following definitions best describes enterprise risk management?

Accepted Answer

A)  Enterprise risk management is narrower than internal control and focuses on managing the risk of loss resulting from external events. 
B)  Enterprise risk management is narrower than internal control and focuses on risk mitigation strategies across the enterprise. 
C)  Enterprise risk management is broader than internal control and focuses on risk identification and management, and assurance that business objectives will be met. 
D)  Enterprise risk management is broader than governance and internal control, and focuses on activities designed to ensure that risks are contained at a level acceptable to the enterprise. 
A)  Enterprise risk management is narrower than internal control and focuses on managing the risk of loss resulting from external events. 
B)  Enterprise risk management is narrower than internal control and focuses on risk mitigation strategies across the enterprise. 
C)  Enterprise risk management is broader than internal control and focuses on risk identification and management, and assurance that business objectives will be met. 
D)  Enterprise risk management is broader than governance and internal control, and focuses on activities designed to ensure that risks are contained at a level acceptable to the enterprise.

Question 20

According to IIA guidance, which of the following best describes acceptable methods for internal auditors to obtain qualified continuing professional education hours?

Accepted Answer

A)  Volunteering in relevant professional organizations, formal education, and online training courses. 
B)  Volunteering in relevant professional organizations, formal education, and tutoring college students. 
C)  Volunteering in relevant professional organizations, on-line training courses, and tutoring college students. 
D)  Formal education, on-line training courses, and tutoring college students. 
A)  Volunteering in relevant professional organizations, formal education, and online training courses. 
B)  Volunteering in relevant professional organizations, formal education, and tutoring college students. 
C)  Volunteering in relevant professional organizations, on-line training courses, and tutoring college students. 
D)  Formal education, on-line training courses, and tutoring college students.

Which of the following best ensures an internal audit activity has the ability to render impartial and unbiased assessments?

According to the COSO Enterprise Risk Management - Integrated Framework, which of the following statements is true regarding the role of risk appetite in an organization?

Which of the following results from computer assisted audit techniques provides the most significant indication that additional audit work is needed?

An internal audit charter should do which of the following?

Internal auditors can benefit from a strong relationship with the external auditors because external auditors can:

Which of the following is a component of the internal audit value proposition endorsed by IIA guidance?

During an internal audit, the internal auditor compares the employee turnover rate in the area being audited with the employee turnover rate in the organization as a whole. This is an example of which of the following analytical auditing procedures?

How should management obtain assurance that employees are complying with the organization's security policy?

An objective for an audit of a medical research corporation is to evaluate management's controls to ensure that timely reports are submitted to sponsors of contracted research projects. In planning the audit to achieve this objective, the auditor should begin by:

Which of the following is least likely to be considered material in an audit of a medium-sized organization?

The chief audit executive (CAE) of a mid-sized pharmaceutical organization has operational responsibility for the regulatory compliance function. The audit committee requests an assessment of regulatory compliance. According to IIA guidance, which of the following is the CAE's best course of action?

The percentage of orders that are rush orders and the percentage of returns to total orders are examples of which of the following types of control activities?

Reportable audit findings must be:

A medical insurance provider uses an electronic claims-submission process and suspects that a number of physicians have submitted claims for treatments that were not performed. Which of the following control procedures would be most effective to detect this type of fraud?

Which of the following are acceptable resources for a chief audit executive to use when developing a staffing plan? 1. Co-sourcing arrangements. 2. Employees from other areas of the organization. 3. The organization's external auditors. 4. The organization's audit committee members.

Which of the following represents the most useful function of inventory turnover analysis?

Which of the following definitions best describes enterprise risk management?

According to IIA guidance, which of the following best describes acceptable methods for internal auditors to obtain qualified continuing professional education hours?

Certified Financial Services Auditor

Certified Government Auditing Professional

Conducting the Internal Audit Engagement

Business Analysis and Information Technology

Filters

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

Which of the following best ensures an internal audit activity has the ability to render impartial and unbiased assessments?

According to the COSO Enterprise Risk Management - Integrated Framework, which of the following statements is true regarding the role of risk appetite in an organization?

Which of the following results from computer assisted audit techniques provides the most significant indication that additional audit work is needed?

An internal audit charter should do which of the following?

Internal auditors can benefit from a strong relationship with the external auditors because external auditors can:

Which of the following is a component of the internal audit value proposition endorsed by IIA guidance?

During an internal audit, the internal auditor compares the employee turnover rate in the area being audited with the employee turnover rate in the organization as a whole. This is an example of which of the following analytical auditing procedures?

How should management obtain assurance that employees are complying with the organization's security policy?

An objective for an audit of a medical research corporation is to evaluate management's controls to ensure that timely reports are submitted to sponsors of contracted research projects. In planning the audit to achieve this objective, the auditor should begin by:

Which of the following is least likely to be considered material in an audit of a medium-sized organization?

The percentage of orders that are rush orders and the percentage of returns to total orders are examples of which of the following types of control activities?

Reportable audit findings must be:

A medical insurance provider uses an electronic claims-submission process and suspects that a number of physicians have submitted claims for treatments that were not performed. Which of the following control procedures would be most effective to detect this type of fraud?

Which of the following are acceptable resources for a chief audit executive to use when developing a staffing plan? 1. Co-sourcing arrangements. 2. Employees from other areas of the organization. 3. The organization's external auditors. 4. The organization's audit committee members.

Which of the following represents the most useful function of inventory turnover analysis?

Which of the following definitions best describes enterprise risk management?

According to IIA guidance, which of the following best describes acceptable methods for internal auditors to obtain qualified continuing professional education hours?

Certified Financial Services Auditor

Certified Government Auditing Professional

Conducting the Internal Audit Engagement

Business Analysis and Information Technology

Filters