Question 1

Which of the following is an advantage of control self-assessment (CSA) over conventional auditing techniques?

Accepted Answer

A)  CSA evaluates control activities and human resource practices. 
B)  CSA provides assurance about whether business objectives will be met. 
C)  CSA facilitates obtaining input from subject-matter experts efficiently. 
D)  CSA provides assurance that action will be taken to improve deficiencies. 
A)  CSA evaluates control activities and human resource practices. 
B)  CSA provides assurance about whether business objectives will be met. 
C)  CSA facilitates obtaining input from subject-matter experts efficiently. 
D)  CSA provides assurance that action will be taken to improve deficiencies.

Question 2

Confirmation would be most effective in addressing the existence assertion for:

Accepted Answer

A)  The addition of a milling machine to a machine shop. 
B)  Sales of merchandise during the regular course of business. 
C)  Inventory held on consignment. 
D)  The granting of a patent for a special process developed by the organization. 
A)  The addition of a milling machine to a machine shop. 
B)  Sales of merchandise during the regular course of business. 
C)  Inventory held on consignment. 
D)  The granting of a patent for a special process developed by the organization.

Question 3

As part of a preliminary survey of the purchasing function, an internal auditor reads the department's policies and procedures manual and concludes that the manual describes the processing steps clearly and contains an appropriate internal control design. The next engagement objective is to evaluate the operating effectiveness of internal controls. Which procedure would fulfill this objective most effectively?

Accepted Answer

A)  Perform a design test. 
B)  Perform a compliance test. 
C)  Perform a systems test. 
D)  Perform an efficiency test. 
A)  Perform a design test. 
B)  Perform a compliance test. 
C)  Perform a systems test. 
D)  Perform an efficiency test.

Question 4

An internal audit activity implemented an integrated test facility to test payroll processing. The auditors identified the key controls and processing steps built into the computer program and developed test data to test them. The auditors submitted test transactions throughout the year and did not find any differences in their test results. The auditors can conclude that:

Accepted Answer

A)  The system is properly capturing the hours worked by employees during the year and the hours have been properly submitted to payroll and processed correctly. 
B)  All employees were correctly paid during the year and their pay was correctly computed. 
C)  The computer application and its control procedures were processing payroll transactions correctly during the past year. 
D)  All of the above. 
A)  The system is properly capturing the hours worked by employees during the year and the hours have been properly submitted to payroll and processed correctly. 
B)  All employees were correctly paid during the year and their pay was correctly computed. 
C)  The computer application and its control procedures were processing payroll transactions correctly during the past year. 
D)  All of the above.

Question 5

Which of the following actions is related to the preliminary survey process?

Accepted Answer

A)  Determining if controls are effective. 
B)  Preparing the engagement work program. 
C)  Identifying the current controls. 
D)  Completing a detailed test of controls. 
A)  Determining if controls are effective. 
B)  Preparing the engagement work program. 
C)  Identifying the current controls. 
D)  Completing a detailed test of controls.

Question 6

Productivity statistics are provided quarterly to a company's board of directors. An auditor checked the ratios and other statistics in the four most recent reports. The auditor used scratch paper and copies of the board reports to verify the accuracy of computations and compared the data used in the computations with supporting documents. The auditor wrote a note describing this work for the workpapers and then discarded the scratch paper and report copies. The auditor's note stated. "The ratios and other statistics in the quarterly board reports were checked for the last four quarters, and appropriate supporting documents were examined. All amounts appear to be appropriate." In this situation:

Accepted Answer

A)  Four quarters is not a large enough sample on which to base a conclusion. 
B)  The auditor's workpapers are not sufficient to facilitate an efficient review of the auditor's work. 
C)  The auditor should have included the scratch paper in the workpapers. 
D)  The auditor should have considered whether the information in the board report was compiled efficiently. 
A)  Four quarters is not a large enough sample on which to base a conclusion. 
B)  The auditor's workpapers are not sufficient to facilitate an efficient review of the auditor's work. 
C)  The auditor should have included the scratch paper in the workpapers. 
D)  The auditor should have considered whether the information in the board report was compiled efficiently.

Question 7

According to IIA guidance, which of the following is true about the supervising internal auditor's review notes? • They are discussed with management prior to finalizing the audit. • They may be discarded after working papers are amended as appropriate. • They are created by the auditor to support her fieldwork in case of questions. • They are not required to support observations issued in the audit report.

Accepted Answer

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

Question 8

If an organization's chief audit executive wants to implement continuous auditing, what is the appropriate order in which key steps should be undertaken?

Accepted Answer

A)  Identify business applications that require access. II. Implement steps to continuously assess risks and controls. III. Define objectives of continuous auditing. IV. Manage and report results. 
B)  III, I, IV, II. 
C)  II, I, III, IV. 
D)  III, I, II, IV. 
E)  II, III, I, IV. 
A)  Identify business applications that require access. II. Implement steps to continuously assess risks and controls. III. Define objectives of continuous auditing. IV. Manage and report results. 
B)  III, I, IV, II. 
C)  II, I, III, IV. 
D)  III, I, II, IV. 
E)  II, III, I, IV.

Question 9

Which of the following is an advantage of an interim report?

Accepted Answer

A)  An interim report provides timely feedback to the audit engagement client. II. An interim report provides a mechanism for communicating information on red flags promptly while they are being investigated. III. An interim report provides an opportunity for auditor follow-up of findings before the engagement is completed. IV. An interim report increases the probability that corrective action will be initiated more quickly. 
B)  I and IV only 
C)  II and III only 
D)  I, III, and IV only 
E)  I, II, III, and IV. 
A)  An interim report provides timely feedback to the audit engagement client. II. An interim report provides a mechanism for communicating information on red flags promptly while they are being investigated. III. An interim report provides an opportunity for auditor follow-up of findings before the engagement is completed. IV. An interim report increases the probability that corrective action will be initiated more quickly. 
B)  I and IV only 
C)  II and III only 
D)  I, III, and IV only 
E)  I, II, III, and IV.

Question 10

An internal auditor has just undertaken an organization-wide risk assessment. In identifying potential audit engagements, the internal auditor should consider least:

Accepted Answer

A)  Focusing on the high risk areas as sources of potential engagements. 
B)  Focusing in areas not audited last year. 
C)  Factoring in management requests. 
D)  Focusing on those risks highlighted by the external auditor. 
A)  Focusing on the high risk areas as sources of potential engagements. 
B)  Focusing in areas not audited last year. 
C)  Factoring in management requests. 
D)  Focusing on those risks highlighted by the external auditor.

Question 11

During an audit of a retail organization, an internal auditor found a scheme in which the warehouse director and the purchasing agent diverted approximately $500,000 of goods to their own warehouse, then sold the goods to third parties. The fraud was not found earlier since the warehouse director updated the perpetual inventory records and then forwarded receiving reports to the accounts payable department for processing. Which of the following procedures would have most likely led to the discovery of the missing materials and the fraud?

Accepted Answer

A)  Select a random sample of receiving reports and trace to the recording in the perpetual inventory records. Note differences and investigate by type of product. 
B)  Select a random sample of purchase orders and trace to receiving reports and to the records in the accounts payable department. 
C)  Take an annual physical inventory, reconciling amounts with the perpetual inventory records. Note the pattern of differences and investigate. 
D)  Select a random sample of sales invoices and trace to the perpetual inventory records to see if inventory was on hand. Investigate any differences. 
A)  Select a random sample of receiving reports and trace to the recording in the perpetual inventory records. Note differences and investigate by type of product. 
B)  Select a random sample of purchase orders and trace to receiving reports and to the records in the accounts payable department. 
C)  Take an annual physical inventory, reconciling amounts with the perpetual inventory records. Note the pattern of differences and investigate. 
D)  Select a random sample of sales invoices and trace to the perpetual inventory records to see if inventory was on hand. Investigate any differences.

Question 12

An internal auditor compared the number of human resources professionals per employee with industry standards. This comparison would assist the auditor in evaluating which of the following areas?

Accepted Answer

A)  Sufficiency of controls over payroll rate increases. 
B)  Current level of performance of the human resources department. 
C)  Adequacy of controls over hiring new employees. 
D)  Degree of compliance with human resources policies. 
A)  Sufficiency of controls over payroll rate increases. 
B)  Current level of performance of the human resources department. 
C)  Adequacy of controls over hiring new employees. 
D)  Degree of compliance with human resources policies.

Question 13

Which of the following represents appropriate evidence of supervisory review of engagement workpapers?

Accepted Answer

A)  A supervisor's initials on each workpaper. II. An engagement workpaper review checklist. III. A memorandum specifying the nature, extent, and results of the supervisory review of workpapers. IV. Performance appraisals that assess the quality of workpapers prepared by auditors. 
B)  II and IV only 
C)  I, II, and III only 
D)  I, III, and IV only 
E)  I, II, III, and IV. 
A)  A supervisor's initials on each workpaper. II. An engagement workpaper review checklist. III. A memorandum specifying the nature, extent, and results of the supervisory review of workpapers. IV. Performance appraisals that assess the quality of workpapers prepared by auditors. 
B)  II and IV only 
C)  I, II, and III only 
D)  I, III, and IV only 
E)  I, II, III, and IV.

Question 14

According to the Standards, which of the following control strategies would be the most effective in helping to prevent fraud?

Accepted Answer

A)  Have employees annually sign a code of conduct requiring that they report any known violations. 
B)  Implement a whistleblower hotline where individuals can make anonymous phone calls to report fraudulent activities. 
C)  Provide periodic fraud awareness training to employees and test their understanding of the training through online surveys. 
D)  Conduct routine employee surveys to solicit their knowledge of fraud and unethical behavior within the organization. 
A)  Have employees annually sign a code of conduct requiring that they report any known violations. 
B)  Implement a whistleblower hotline where individuals can make anonymous phone calls to report fraudulent activities. 
C)  Provide periodic fraud awareness training to employees and test their understanding of the training through online surveys. 
D)  Conduct routine employee surveys to solicit their knowledge of fraud and unethical behavior within the organization.

Question 15

The chief audit executive of a large publicly held bank is using a risk based approach to update the annual audit plan. Which of the following sources of information will have the least impact on the plan?

Accepted Answer

A)  The 12 month forecast of commercial property values. 
B)  Recent changes to the bank's strategic plan. 
C)  Regulatory changes impacting capitalization for all publicly traded banks. 
D)  Continuous changes in the prime lending rate set by the country's central bank. 
A)  The 12 month forecast of commercial property values. 
B)  Recent changes to the bank's strategic plan. 
C)  Regulatory changes impacting capitalization for all publicly traded banks. 
D)  Continuous changes in the prime lending rate set by the country's central bank.

Question 16

A newly promoted chief audit executive (CAE) is faced with a backlog of assurance engagement reports to review for approval. In an attempt to attach a priority for this review, the CAE scans the opinion statement on each report. According to IIA guidance, which of the following opinions would receive the lowest review priority? 1. Graded positive opinion. 2. Negative assurance opinion. 3. Limited assurance opinion. 4. Third-party opinion.

Accepted Answer

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

Question 17

When developing the scope of an audit engagement, which of the following would the internal auditor typically not need to consider?

Accepted Answer

A)  The need and availability of automated support. 
B)  The potential impact of key risks. 
C)  The expected outcomes and deliverables. 
D)  The operational and geographic boundaries. 
A)  The need and availability of automated support. 
B)  The potential impact of key risks. 
C)  The expected outcomes and deliverables. 
D)  The operational and geographic boundaries.

Question 18

What does the following scatter gram suggest?

Accepted Answer

A)  Sales revenue is related to training costs. 
B)  The training program is not effective. 
C)  Increases in training costs consistently increase sales revenue. 
D)  One data point is incorrectly plotted. 
A)  Sales revenue is related to training costs. 
B)  The training program is not effective. 
C)  Increases in training costs consistently increase sales revenue. 
D)  One data point is incorrectly plotted.

Question 19

Which of the following is not relevant when developing recommendations for inclusion in audit reports?

Accepted Answer

A)  Feasibility. 
B)  Cost of implementation. 
C)  Underlying causes. 
D)  Timing of follow-up. 
A)  Feasibility. 
B)  Cost of implementation. 
C)  Underlying causes. 
D)  Timing of follow-up.

Question 20

The external auditor has identified a number of production process control deficiencies involving several departments. As a result, senior management has asked the internal audit activity to complete internal control training for all related staff. According to IIA guidance, which of the following would be the most appropriate course of action for the chief audit executive to follow?

Accepted Answer

A)  Refuse to accept the consulting engagement because it would be a violation of independence. 
B)  Collaborate with the external auditor to ensure the most efficient use of resources. 
C)  Accept the engagement but hire an external training specialist to provide the necessary expertise. 
D)  Accept the engagement even if the audit engagement staff was previously responsible for operational areas being trained. 
A)  Refuse to accept the consulting engagement because it would be a violation of independence. 
B)  Collaborate with the external auditor to ensure the most efficient use of resources. 
C)  Accept the engagement but hire an external training specialist to provide the necessary expertise. 
D)  Accept the engagement even if the audit engagement staff was previously responsible for operational areas being trained.

Which of the following is an advantage of control self-assessment (CSA) over conventional auditing techniques?

Confirmation would be most effective in addressing the existence assertion for:

Which of the following actions is related to the preliminary survey process?

If an organization's chief audit executive wants to implement continuous auditing, what is the appropriate order in which key steps should be undertaken?

Which of the following is an advantage of an interim report?

An internal auditor has just undertaken an organization-wide risk assessment. In identifying potential audit engagements, the internal auditor should consider least:

An internal auditor compared the number of human resources professionals per employee with industry standards. This comparison would assist the auditor in evaluating which of the following areas?

Which of the following represents appropriate evidence of supervisory review of engagement workpapers?

According to the Standards, which of the following control strategies would be the most effective in helping to prevent fraud?

The chief audit executive of a large publicly held bank is using a risk based approach to update the annual audit plan. Which of the following sources of information will have the least impact on the plan?

When developing the scope of an audit engagement, which of the following would the internal auditor typically not need to consider?

What does the following scatter gram suggest?

Which of the following is not relevant when developing recommendations for inclusion in audit reports?

Certified Financial Services Auditor

Certified Government Auditing Professional

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

Business Analysis and Information Technology

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Exam 4: Conducting the Internal Audit Engagement

Which of the following is an advantage of control self-assessment (CSA) over conventional auditing techniques?

Confirmation would be most effective in addressing the existence assertion for:

Which of the following actions is related to the preliminary survey process?

If an organization's chief audit executive wants to implement continuous auditing, what is the appropriate order in which key steps should be undertaken?

Which of the following is an advantage of an interim report?

An internal auditor has just undertaken an organization-wide risk assessment. In identifying potential audit engagements, the internal auditor should consider least:

An internal auditor compared the number of human resources professionals per employee with industry standards. This comparison would assist the auditor in evaluating which of the following areas?

Which of the following represents appropriate evidence of supervisory review of engagement workpapers?

According to the Standards, which of the following control strategies would be the most effective in helping to prevent fraud?

The chief audit executive of a large publicly held bank is using a risk based approach to update the annual audit plan. Which of the following sources of information will have the least impact on the plan?

When developing the scope of an audit engagement, which of the following would the internal auditor typically not need to consider?

What does the following scatter gram suggest?

Which of the following is not relevant when developing recommendations for inclusion in audit reports?

Certified Financial Services Auditor

Certified Government Auditing Professional

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

Business Analysis and Information Technology

Filters