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

An internal audit activity has made a preliminary determination that a division of the organization has employed improper accounting practices. Upon being informed, the head of the organization instructs the chief audit executive (CAE) to cease the investigation and to withhold the information from external auditors. Which course of action should the CAE follow?

The best reason for separating the cash-receiving function from the related record-keeping function is to:

Two individuals are being considered for an audit team that is to perform a highly technical review. Which of the following situations would preclude selection of the individual for the audit due to an objectivity concern?

Some of an organization's payroll transactions were batch posted to the payroll file but were not uploaded correctly to the general ledger file on the mainframe. The best control to detect this type of error would be:

Which of the following best describes how the increased use of computerization may impact an auditor's assessment of the risk of fraud?

Which of the following statements is true regarding the use of non-statistical sampling in auditing control tests?

Which of the following is an example of sharing risk?

An internal auditor is testing whether payments to outside contractors have been charged to the proper account. Which of the following sampling methods would be most useful in completing this task?

Which of the following is not an appropriate role of the internal audit activity in governance activities?

During an audit engagement in an insurance company, an internal auditor discovered that senior management had purposely misclassified $200, 000 in assets on financial statements submitted to regulatory authorities in order to avoid significant statutory penalties. To remain in compliance with the IIA Code of Ethics, what would be the most appropriate action for the auditor to take?

Which of the following reporting relationships results in the greatest impairment to the independence of the chief audit executive (CAE)?

Which of the following is an example of a preventive control activity for risk related to pollution caused by waste disposal?

Which of the following are appropriate responsibilities of the audit committee in relation to the chief audit executive (CAE)? 1. Approving the internal audit charter. 2. Approving decisions regarding the appointment and removal of the CAE. 3. Approving the risk management strategy for the organization. 4. Making appropriate inquiries of management and the CAE to determine whether there are inappropriate scope and resource limitations.

Which of the following enhances the independence of the internal audit activity?

Company A has a formal comprehensive corporate code of ethics while company B does not. Which of the following statements regarding the existence of the code of ethics in company A can be logically inferred? 1. Company A exhibits a higher standard of ethical behavior than does company B. 2. Company A has established objective criteria by which an employee's actions can be evaluated. 3. The absence of a formal corporate code of ethics in company B would prevent a successful audit of ethical behavior in that company.

The primary objective of risk-based auditing is to assess the:

Which of the following is an appropriate role for the board in governance?

Which of the following is an activity that an internal auditor must not perform?

An organization's sales professionals are potentially abusing the use of cellular phones, resulting in an alarming increase in telephone expenses. Which of the following controls is least likely to curb this abuse?

According to IIA guidance, which of the following is the most likely obstacle to undertaking a quality assurance and improvement program by the internal audit activity?