Exam 4: Conducting the Internal Audit Engagement

An internal auditor is planning an assurance engagement. The auditor first reviews the department's business objectives. What is the next step?

An internal auditor was assigned to conduct an inventory control and stock room area engagement. During the audit, the auditor observed that there were some items that have a shelf life expiration date requirement based on a certificate of conformance received with the product. The certificates of conformance are kept on file in the inventory area office and the expiration date is verified at the time the item is taken from stock. The auditor reviewed the items in the stock room and also on the production floor for the expiration dates to see if there was any expired product. All items with a shelf life requirement were found to be within the expiration date requirement. Which of the following recommendations would be appropriate?

The chief audit executive (CAE) determined that based on management's oral response, the action taken regarding an audit observation was sufficient when weighted against the relative importance of the audit recommendation. Which of the following is the most appropriate step for the internal auditor to take next?

An internal auditor noticed that employees with responsibilities for cash collection had recently issued an unusually large number of credit memos, indicating that the original charges had been made to the wrong customer accounts. From a control standpoint, the auditor would be concerned with the possibility that:

The chief audit executive (CAE) of an organization has established an internal audit activity (IAA) quality assessment program. According to IIA guidance, which of the following would be part of this program?

An audit department has received anonymous information that an employee has allegedly been able to steal and cash checks sent to the organization by customers. What is the most efficient way for an auditor to determine how this type of fraud could occur and who might be the perpetrator?

After the team member who specialized in fraud investigations left the internal audit team, the chief audit executive decided to outsource fraud investigations to a third party service provider on an as needed basis. Which of the following is most likely to be a disadvantage of this outsourcing decision?

Due to a recent system upgrade, an audit is planned to test the payroll process. Which of the following audit objectives would be most important to prevent fraud?

When establishing the internal audit activity's annual plan, which of the following would be the best source of potential audit engagement topics?

Which of the following would be a red flag that indicates the possibility of inventory fraud?

When creating the internal audit plan, the chief audit executive should prioritize engagements based primarily on which of the following?

Given the scarcity of internal audit resources, a chief audit executive (CAE) decides not to schedule a follow-up of audit recommendations when developing engagement work schedules. Why does the CAE's decision violate the Standards?

An audit identified a number of weaknesses in the configuration of a critical client/server system. Although some of the weaknesses were corrected prior to the issuance of the audit report, correction of the rest will require between six and 18 months for completion. Consequently, management has developed a detailed action plan, with anticipated completion dates, for addressing the weaknesses. Which of the following is the most appropriate course of action for the chief audit executive to take?

As a result of a recent discovery of false information on employment applications, an internal auditor has reviewed hiring procedures. Which of the following represents a weakness in the control system?

Which of the following files, when compared with billing records, would provide the best source of information for determining if all goods shipped are billed to customers?

Which of the following techniques could be used to evaluate the effectiveness of changes to the operation of a computer help line?

According to IIA guidance, which of the following are the most important objectives for helping to ensure the appropriate completion of an engagement? 1. Coordinate audit team members to ensure the efficient execution of all engagement procedures. 2. Confirm engagement workpapers properly support the observations, recommendations, and conclusions. 3. Provide structured learning opportunities for engagement auditors when possible. 4. Ensure engagement objectives are reviewed for satisfactory achievement and are documented properly.

Which of the following situations would best support the decision of a chief audit executive (CAE) to defer follow-up activity at a branch office until the next audit engagement?

Which of the following should be included in the scope of an audit of a third-party contractor? 1. Budgets and financial forecasts for the project. 2. Contractor's information and control systems. 3. Contractor's financial position. 4. Progress of the project and costs incurred.

A company used simple regression analysis to analyze maintenance costs against machine hours (MH) for a 26-week period when the plant was in full operation. The regression yielded the following estimated cost function: Maintenance Cost = $60 + $0.25/MH The regression analysis also generated a coefficient of determination (R2), or goodness of fit, of 0.85. Which of the following statements regarding this regression analysis is appropriate?