Question 1

Which role is not considered a change agent when an organization wants to implement structural changes?

Accepted Answer

A)  Senior management. 
B)  Line management. 
C)  Independent consultant. 
D)  Shareholder. 
A)  Senior management. 
B)  Line management. 
C)  Independent consultant. 
D)  Shareholder.

Question 2

In forming a team to investigate an organization's potential adoption of an activity-based costing system, the best reason to include an internal auditor on the team would be the auditor's knowledge of:

Accepted Answer

A)  Activities and cost drivers. 
B)  Information processing procedures. 
C)  Current product cost structures. 
D)  Internal control alternatives. 
A)  Activities and cost drivers. 
B)  Information processing procedures. 
C)  Current product cost structures. 
D)  Internal control alternatives.

Question 3

Which of the following is used to identify and prioritize critical business applications to determine those that must be restored and the order of restoration in the event that a disaster impairs information systems processing?

Accepted Answer

A)  Contingent facility contract analysis. 
B)  System backup analysis. 
C)  Vendor supply agreement analysis. 
D)  Risk analysis. 
A)  Contingent facility contract analysis. 
B)  System backup analysis. 
C)  Vendor supply agreement analysis. 
D)  Risk analysis.

Question 4

Which of the following factors would the auditor in charge be least likely to consider when assigning tasks to audit team members for an engagement?

Accepted Answer

A)  The amount of experience the auditors have conducting audits in the specific area of the organization. 
B)  The availability of the auditors in relation to the availability of key client staff. 
C)  Whether the budgeted hours are sufficient to complete the audit within the current scope. 
D)  Whether outside resources will be needed, and their availability. 
A)  The amount of experience the auditors have conducting audits in the specific area of the organization. 
B)  The availability of the auditors in relation to the availability of key client staff. 
C)  Whether the budgeted hours are sufficient to complete the audit within the current scope. 
D)  Whether outside resources will be needed, and their availability.

Question 5

Which of the following is not a direct benefit of control self-assessment (CSA)?

Accepted Answer

A)  CSA allows management to have input into the audit plan. 
B)  CSA allows process owners to identify, evaluate, and recommend improving control deficiencies. 
C)  CSA can improve the control environment. 
D)  CSA increases control consciousness. 
A)  CSA allows management to have input into the audit plan. 
B)  CSA allows process owners to identify, evaluate, and recommend improving control deficiencies. 
C)  CSA can improve the control environment. 
D)  CSA increases control consciousness.

Question 6

An auditor for a major retail company suspects that inventory fraud is occurring at three stores which have high costs of goods sold. Which of the following audit activities would provide the most persuasive evidence that fraud is occurring?

Accepted Answer

A)  Use an integrated test facility (ITF) to compare individual sales transactions with test transactions submitted through the ITF and investigate all differences. 
B)  Interview the three individual store managers to determine if their explanations about the observed differences are the same, and then compare their explanations to that of the section manager. 
C)  Schedule a surprise inventory audit to include a physical inventory and investigate areas of inventory shrinkage. 
D)  Select a sample of individual store prices and compare them with the sales entered on the cash register for the same items. 
A)  Use an integrated test facility (ITF) to compare individual sales transactions with test transactions submitted through the ITF and investigate all differences. 
B)  Interview the three individual store managers to determine if their explanations about the observed differences are the same, and then compare their explanations to that of the section manager. 
C)  Schedule a surprise inventory audit to include a physical inventory and investigate areas of inventory shrinkage. 
D)  Select a sample of individual store prices and compare them with the sales entered on the cash register for the same items.

Question 7

Which of the following would provide the best audit evidence regarding the effectiveness of an applied research department?

Accepted Answer

A)  Develop a cost-per-product analysis for products developed over the past five years. 
B)  Develop a report on revenue generated by or cost savings directly attributable to newly developed products. 
C)  Compare research as a percentage of revenue between this company and all major competitors in the same industry. 
D)  Compare the number of this year's new product developments to the number of new product developments for the past five years. 
A)  Develop a cost-per-product analysis for products developed over the past five years. 
B)  Develop a report on revenue generated by or cost savings directly attributable to newly developed products. 
C)  Compare research as a percentage of revenue between this company and all major competitors in the same industry. 
D)  Compare the number of this year's new product developments to the number of new product developments for the past five years.

Question 8

During an audit of an ethics program, which of the following procedures are most appropriate to evaluate the effectiveness of the program? • Testing whether corrective actions taken on involved parties breaching the ethics program are adequate. • Testing whether all employees are mandated through policy to comply with the ethics program. • Testing whether all employees are required to confirm in writing their compliance with the ethics program. • Testing through surveys employee's level of understanding and commitment to the ethics program.

Accepted Answer

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

Question 9

An internal control questionnaire would be most appropriate in which of the following situations?

Accepted Answer

A)  Testing controls where operating procedures vary. 
B)  Testing controls in decentralized offices. 
C)  Testing controls in high risk areas. 
D)  Testing controls in areas with high control failure rates. 
A)  Testing controls where operating procedures vary. 
B)  Testing controls in decentralized offices. 
C)  Testing controls in high risk areas. 
D)  Testing controls in areas with high control failure rates.

Question 10

During an audit of a major metropolitan museum, an auditor was unable to locate selected items from the museum's collection. The director of the museum informed the auditor that the upcoming replacement of the museum's inventory tracking system would address the auditor's concerns. What follow-up activity should the auditor propose?

Accepted Answer

A)  Receive periodic feedback from museum staff regarding the status of the system implementation. 
B)  Monitor the system implementation and schedule a follow-up review once the new system is in place. 
C)  Determine whether the items are indeed missing and assess the ability of the new system to remedy the problem. 
D)  Schedule an audit of the museum's security systems to determine if theft is a problem. 
A)  Receive periodic feedback from museum staff regarding the status of the system implementation. 
B)  Monitor the system implementation and schedule a follow-up review once the new system is in place. 
C)  Determine whether the items are indeed missing and assess the ability of the new system to remedy the problem. 
D)  Schedule an audit of the museum's security systems to determine if theft is a problem.

Question 11

Which of the following types of internal audit consulting engagements is an example of a facilitation service?

Accepted Answer

A)  Conducting control self-assessment workshops. II. Participating on standing committees. III. Reviewing regulatory compliance. IV. Benchmarking. 
B)  Estimating savings from outsourcing processes. 
C)  I and IV only 
D)  I, III, and IV only 
E)  II, III, and V only
F) I, II, III, IV, and V. 
A)  Conducting control self-assessment workshops. II. Participating on standing committees. III. Reviewing regulatory compliance. IV. Benchmarking. 
B)  Estimating savings from outsourcing processes. 
C)  I and IV only 
D)  I, III, and IV only 
E)  II, III, and V only
F) I, II, III, IV, and V.

Question 12

An internal auditor is discussing an audit problem with an engagement client. While listening to the client, the internal auditor should:

Accepted Answer

A)  Prepare a response to the client. 
B)  Take mental notes on the speaker's nonverbal communication, as it is more important than what is being said. 
C)  Make sure that all details, as well as the main ideas of the client, are remembered. 
D)  Integrate the incoming information from the client with information that is already known. 
A)  Prepare a response to the client. 
B)  Take mental notes on the speaker's nonverbal communication, as it is more important than what is being said. 
C)  Make sure that all details, as well as the main ideas of the client, are remembered. 
D)  Integrate the incoming information from the client with information that is already known.

Question 13

An audit of an organization's fulfillment department discovered that problems in the order processing system led to a significant number of orders being fulfilled multiple times. During the exit conference, the head of the department informed the auditors that the processing system would be enhanced within six months to correct the problems. Which course of action should the chief audit executive follow?

Accepted Answer

A)  Adjust the scope of the next scheduled audit to determine that the problems have been resolved. 
B)  Monitor the status of corrective action and schedule a follow-up engagement when appropriate. 
C)  Meet with the audit committee to determine the appropriate follow-up action. 
D)  Assess the status of corrective action in a follow-up engagement in six months. 
A)  Adjust the scope of the next scheduled audit to determine that the problems have been resolved. 
B)  Monitor the status of corrective action and schedule a follow-up engagement when appropriate. 
C)  Meet with the audit committee to determine the appropriate follow-up action. 
D)  Assess the status of corrective action in a follow-up engagement in six months.

Question 14

Because of a new marketing initiative, an organization has reduced requirements for extending credit to new customers. As a result, outstanding accounts receivable as a percentage of revenue has increased significantly during the past two years. Which of the following would be least useful in monitoring this finding?

Accepted Answer

A)  Updates from the manager of accounts receivable regarding collection of outstanding receivables. 
B)  Updates from the information technology division regarding development of a new accounts receivable system. 
C)  Updates from the controller regarding the status of corrective actions. 
D)  Updates from the credit and marketing personnel tasked with reevaluating credit policies. 
A)  Updates from the manager of accounts receivable regarding collection of outstanding receivables. 
B)  Updates from the information technology division regarding development of a new accounts receivable system. 
C)  Updates from the controller regarding the status of corrective actions. 
D)  Updates from the credit and marketing personnel tasked with reevaluating credit policies.

Question 15

An audit of management's quality program includes testing the accuracy of the cost-of-quality reports provided to management. Which of the following internal control objectives is the focus of this testing?

Accepted Answer

A)  To ensure compliance with policies, plans, procedures, laws, and regulations. 
B)  To ensure the accomplishment of established objectives and goals for operations or programs. 
C)  To ensure the reliability and integrity of information. 
D)  To ensure the economical and efficient use of resources. 
A)  To ensure compliance with policies, plans, procedures, laws, and regulations. 
B)  To ensure the accomplishment of established objectives and goals for operations or programs. 
C)  To ensure the reliability and integrity of information. 
D)  To ensure the economical and efficient use of resources.

Question 16

Which of the following is least likely to help ensure that risk is considered in a work program?

Accepted Answer

A)  Risks are discussed with audit client. 
B)  All available information from the risk-based plan is used. 
C)  Client efforts to affect risk management are considered. 
D)  Prior risk assessments are considered. 
A)  Risks are discussed with audit client. 
B)  All available information from the risk-based plan is used. 
C)  Client efforts to affect risk management are considered. 
D)  Prior risk assessments are considered.

Question 17

One method for dealing with the uncertainty of demand forecasts used in linear programming is to extend the model solution to include.

Accepted Answer

A)  Sensitivity analysis. 
B)  Goal seeking. 
C)  Branch-and-bound solutions. 
D)  Nonlinear programming. 
A)  Sensitivity analysis. 
B)  Goal seeking. 
C)  Branch-and-bound solutions. 
D)  Nonlinear programming.

Question 18

At the conclusion of an audit of an organization's treasury department, a report was issued to the treasurer, chief financial officer, president, and board. Because of the sensitivity of some findings, a follow-up review was performed. The auditor should provide the report of follow-up findings to the:

Accepted Answer

A)  Treasurer. II. Chief financial officer. III. President. IV. Board. 
B)  I and II only 
C)  III and IV only 
D)  I, II, and III only 
E)  I, II, III, and IV. 
A)  Treasurer. II. Chief financial officer. III. President. IV. Board. 
B)  I and II only 
C)  III and IV only 
D)  I, II, and III only 
E)  I, II, III, and IV.

Question 19

Which of the following should be included in a privacy audit engagement? 1. Assess the appropriateness of the information gathered. 2. Review the methods used to collect information. 3. Consider whether the information collected is in compliance with applicable laws. 4. Determine how the information is stored.

Accepted Answer

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

Question 20

During an operational audit of a chain of pizza delivery stores, an auditor determined that cold pizzas were causing customer dissatisfaction. A review of oven calibration records for the last six months revealed that adjustments were made on over 40 percent of the ovens. Based on this, the auditor:

Accepted Answer

A)  Has enough evidence to conclude that improperly functioning ovens are the cause. 
B)  Needs to conduct further inquiries and reviews to determine the impact of the oven variations on the pizza temperature. 
C)  Has enough evidence to recommend the replacement of some of the ovens. 
D)  Must search for another cause since approximately 60 percent of the ovens did not require adjustment. 
A)  Has enough evidence to conclude that improperly functioning ovens are the cause. 
B)  Needs to conduct further inquiries and reviews to determine the impact of the oven variations on the pizza temperature. 
C)  Has enough evidence to recommend the replacement of some of the ovens. 
D)  Must search for another cause since approximately 60 percent of the ovens did not require adjustment.

Which role is not considered a change agent when an organization wants to implement structural changes?

In forming a team to investigate an organization's potential adoption of an activity-based costing system, the best reason to include an internal auditor on the team would be the auditor's knowledge of:

Which of the following is used to identify and prioritize critical business applications to determine those that must be restored and the order of restoration in the event that a disaster impairs information systems processing?

Which of the following factors would the auditor in charge be least likely to consider when assigning tasks to audit team members for an engagement?

Which of the following is not a direct benefit of control self-assessment (CSA)?

An auditor for a major retail company suspects that inventory fraud is occurring at three stores which have high costs of goods sold. Which of the following audit activities would provide the most persuasive evidence that fraud is occurring?

Which of the following would provide the best audit evidence regarding the effectiveness of an applied research department?

An internal control questionnaire would be most appropriate in which of the following situations?

Which of the following types of internal audit consulting engagements is an example of a facilitation service?

An internal auditor is discussing an audit problem with an engagement client. While listening to the client, the internal auditor should:

An audit of management's quality program includes testing the accuracy of the cost-of-quality reports provided to management. Which of the following internal control objectives is the focus of this testing?

Which of the following is least likely to help ensure that risk is considered in a work program?

One method for dealing with the uncertainty of demand forecasts used in linear programming is to extend the model solution to include.

During an operational audit of a chain of pizza delivery stores, an auditor determined that cold pizzas were causing customer dissatisfaction. A review of oven calibration records for the last six months revealed that adjustments were made on over 40 percent of the ovens. Based on this, the auditor:

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Exam 4: Conducting the Internal Audit Engagement

Which role is not considered a change agent when an organization wants to implement structural changes?

In forming a team to investigate an organization's potential adoption of an activity-based costing system, the best reason to include an internal auditor on the team would be the auditor's knowledge of:

Which of the following is used to identify and prioritize critical business applications to determine those that must be restored and the order of restoration in the event that a disaster impairs information systems processing?

Which of the following factors would the auditor in charge be least likely to consider when assigning tasks to audit team members for an engagement?

Which of the following is not a direct benefit of control self-assessment (CSA)?

An auditor for a major retail company suspects that inventory fraud is occurring at three stores which have high costs of goods sold. Which of the following audit activities would provide the most persuasive evidence that fraud is occurring?

Which of the following would provide the best audit evidence regarding the effectiveness of an applied research department?

An internal control questionnaire would be most appropriate in which of the following situations?

Which of the following types of internal audit consulting engagements is an example of a facilitation service?

An internal auditor is discussing an audit problem with an engagement client. While listening to the client, the internal auditor should:

An audit of management's quality program includes testing the accuracy of the cost-of-quality reports provided to management. Which of the following internal control objectives is the focus of this testing?

Which of the following is least likely to help ensure that risk is considered in a work program?

One method for dealing with the uncertainty of demand forecasts used in linear programming is to extend the model solution to include.

Certified Financial Services Auditor

Certified Government Auditing Professional

The Internal Audit Activity Role in Governance, Risk, and Control

Business Analysis and Information Technology

Filters