Question 1

Which of the following factors could interfere with effective problem solving by an internal auditor?

Accepted Answer

A)  Reacting to previous experiences with clients. II. Focusing only on the most likely cause. III. Correcting the symptoms of problems. 
B)  I only 
C)  III only 
D)  I and II only 
E)  I, II, and III 
A)  Reacting to previous experiences with clients. II. Focusing only on the most likely cause. III. Correcting the symptoms of problems. 
B)  I only 
C)  III only 
D)  I and II only 
E)  I, II, and III

Question 2

A draft internal audit report that cites deficient conditions generally should be reviewed with which of the following groups? 1. The client manager and her superior. 2. Anyone who may object to the report's validity. 3. Anyone required to take action. 4. The same individuals who receive the final report.

Accepted Answer

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

Question 3

In a client satisfaction survey for an internal audit engagement, client management should be asked to assess which of the following factors?

Accepted Answer

A)  Audit team's knowledge of the audited area. II. Usefulness of the audit results. III. Quality of management of the internal audit activity. IV. Clarity of the scope and objectives of the audit engagement. 
B)  I and II only 
C)  II and IV only 
D)  I, II, and IV only 
E)  I, III, and IV only 
A)  Audit team's knowledge of the audited area. II. Usefulness of the audit results. III. Quality of management of the internal audit activity. IV. Clarity of the scope and objectives of the audit engagement. 
B)  I and II only 
C)  II and IV only 
D)  I, II, and IV only 
E)  I, III, and IV only

Question 4

The following audit observation was included in the final audit report: "Our review concluded that bank reconciliation statements for March and April did not show evidence of supervisory review. We recommend strict compliance with the controller's manual, which requires the department head to place their initials on the reconciliation statements to document their review." Which of the following attributes are missing from the above audit observation? 1. Criteria. 2. Condition. 3. Cause. 4. Effect.

Accepted Answer

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

Question 5

A code of ethics within the internal auditing profession is necessary in order to:

Accepted Answer

A)  Reduce the likelihood that members of the profession will be sued for substandard work. 
B)  Ensure that all members of the profession perform at approximately the same level of competence. 
C)  Provide guidance to internal auditors in their service to others. 
D)  Require members of the profession to exhibit loyalty in all matters pertaining to the affairs of their organization. 
A)  Reduce the likelihood that members of the profession will be sued for substandard work. 
B)  Ensure that all members of the profession perform at approximately the same level of competence. 
C)  Provide guidance to internal auditors in their service to others. 
D)  Require members of the profession to exhibit loyalty in all matters pertaining to the affairs of their organization.

Question 6

It is close to the fiscal year end for a government agency, and the chief audit executive (CAE) has the following items to submit to either the board or the chief executive officer (CEO) for approval. According to IIA guidance, which of the following items should be submitted only to the CEO?

Accepted Answer

A)  The internal audit risk assessment and audit plan for the next fiscal year. 
B)  The internal audit budget and resource plan for the coming fiscal year. 
C)  A request for an increase of the CAE's salary for the next fiscal year. 
D)  The evaluation and compensation of the internal audit team. 
A)  The internal audit risk assessment and audit plan for the next fiscal year. 
B)  The internal audit budget and resource plan for the coming fiscal year. 
C)  A request for an increase of the CAE's salary for the next fiscal year. 
D)  The evaluation and compensation of the internal audit team.

Question 7

Which of the following behaviors could represent a significant ethical risk if exhibited by an organization's board? 1. Intervening during an audit involving ethical wrongdoing. 2. Discussing periodic reports of ethical breaches. 3. Authorizing an investigation of an unsafe product. 4. Negotiating a settlement of an employee claim for personal damages.

Accepted Answer

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

Question 8

Checklists used to assess audit risk have been criticized for all of the following reasons except:

Accepted Answer

A)  Providing a false sense of security that all relevant factors are addressed. 
B)  Inappropriately implying equal weight to each item on the checklist. 
C)  Decreasing the uniformity of data acquisition. 
D)  Being incapable of translating the experience or sound reasoning intended to be captured by each item on the checklist. 
A)  Providing a false sense of security that all relevant factors are addressed. 
B)  Inappropriately implying equal weight to each item on the checklist. 
C)  Decreasing the uniformity of data acquisition. 
D)  Being incapable of translating the experience or sound reasoning intended to be captured by each item on the checklist.

Question 9

If an auditor expects to find numerous discrepancies between recorded values and audited values of sample selections, which sampling technique would be most appropriate?

Accepted Answer

A)  Attributes sampling. 
B)  Probability-proportional-to-size sampling. 
C)  Difference estimation sampling. 
D)  Discovery sampling. 
A)  Attributes sampling. 
B)  Probability-proportional-to-size sampling. 
C)  Difference estimation sampling. 
D)  Discovery sampling.

Question 10

Which of the following statements about internal audit's follow-up process is true?

Accepted Answer

A)  The nature, timing, and extent of follow-up for assurance engagements is standardized to ensure quality performance. 
B)  The actions of external auditors and other external assurance providers is not encompassed by internal audit's follow-up process. 
C)  Internal auditors have responsibility for determining if management and the board have implemented the recommended action or otherwise accepted the risk. 
D)  The follow-up process must be complete and documented in the working papers in order to conclude the engagement. 
A)  The nature, timing, and extent of follow-up for assurance engagements is standardized to ensure quality performance. 
B)  The actions of external auditors and other external assurance providers is not encompassed by internal audit's follow-up process. 
C)  Internal auditors have responsibility for determining if management and the board have implemented the recommended action or otherwise accepted the risk. 
D)  The follow-up process must be complete and documented in the working papers in order to conclude the engagement.

Question 11

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 6 and 18 months for completion. Consequently, management has developed a detailed action plan, with anticipated completion dates, for addressing the weaknesses. What is the most appropriate course of action for the chief audit executive to take?

Accepted Answer

A)  Assess the status of corrective action during a follow-up audit engagement after the action plan has been completed. 
B)  Assess the effectiveness of corrections by reviewing statistics related to unplanned system outages, and denials of service. 
C)  Reassign information systems auditors to assist in implementing management's action plan. 
D)  Evaluate the ability of the action plan to correct the weaknesses and monitor key dates and deliverables. 
A)  Assess the status of corrective action during a follow-up audit engagement after the action plan has been completed. 
B)  Assess the effectiveness of corrections by reviewing statistics related to unplanned system outages, and denials of service. 
C)  Reassign information systems auditors to assist in implementing management's action plan. 
D)  Evaluate the ability of the action plan to correct the weaknesses and monitor key dates and deliverables.

Question 12

Which of the following is the most common method management can use to manage risk within its risk appetite?

Accepted Answer

A)  Implementation of controls. 
B)  Use of risk registers and dashboard. 
C)  Frequent communication of risk appetite for operating personnel. 
D)  Continuous evaluations and audits. 
A)  Implementation of controls. 
B)  Use of risk registers and dashboard. 
C)  Frequent communication of risk appetite for operating personnel. 
D)  Continuous evaluations and audits.

Question 13

Which of the following is an advantage to using the questionnaire approach when conducting risk and control self assessments?

Accepted Answer

A)  Responses can easily be quantified and analyzed. 
B)  Follow-up for clarification is efficient. 
C)  It is educational for participants. 
D)  It allows for in-depth probing of issues. 
A)  Responses can easily be quantified and analyzed. 
B)  Follow-up for clarification is efficient. 
C)  It is educational for participants. 
D)  It allows for in-depth probing of issues.

Question 14

According to IIA guidance, which of the following is the least appropriate role for the internal audit activity in the organization's risk management program?

Accepted Answer

A)  Conducting full investigations of suspected fraud. 
B)  Monitoring the organization's whistle-blower hotline. 
C)  Assessing the risk of fraudulent activity in the organization. 
D)  Providing ethics training sessions to organization staff. 
A)  Conducting full investigations of suspected fraud. 
B)  Monitoring the organization's whistle-blower hotline. 
C)  Assessing the risk of fraudulent activity in the organization. 
D)  Providing ethics training sessions to organization staff.

Question 15

According to IIA guidance, which of the following is true when the internal audit activity is asked to investigate potential ethics violations in a foreign subsidiary?

Accepted Answer

A)  Communication of any internal ethics violations to external parties may occur with appropriate safeguards. 
B)  Cultural impacts are less critical where the organization practices uniform polices around the globe. 
C)  Cross-cultural differences should always be handled by the staff of the same cultural background. 
D)  Local law enforcement should be involved as they are more familiar with the applicable local laws. 
A)  Communication of any internal ethics violations to external parties may occur with appropriate safeguards. 
B)  Cultural impacts are less critical where the organization practices uniform polices around the globe. 
C)  Cross-cultural differences should always be handled by the staff of the same cultural background. 
D)  Local law enforcement should be involved as they are more familiar with the applicable local laws.

Question 16

Why should internal auditors develop a strong relationship with the external auditors?

Accepted Answer

A)  External auditors offer an additional layer of approval to internal auditors' reports. 
B)  External auditors can help improve the effectiveness of internal control sampling techniques. 
C)  External auditors can offer an independent and knowledgeable viewpoint. 
D)  External auditors can share information gained from work with similar clients. 
A)  External auditors offer an additional layer of approval to internal auditors' reports. 
B)  External auditors can help improve the effectiveness of internal control sampling techniques. 
C)  External auditors can offer an independent and knowledgeable viewpoint. 
D)  External auditors can share information gained from work with similar clients.

Question 17

An internal auditor has completed an audit of an organization's activities and is ready to issue a report. However, the client disagrees with the internal auditor's conclusions. The auditor should:

Accepted Answer

A)  Withhold the issuance of the audit report until agreement on the issues is obtained. 
B)  Issue the audit report and state both the auditor and client positions and the reasons for the disagreement. 
C)  Issue the audit report and omit the client's conclusion as it is not the opinion of the internal auditor. 
D)  Perform additional work, with the client's concurrence, to resolve the areas of disagreement and delay the issuance of the report until agreement is reached. 
A)  Withhold the issuance of the audit report until agreement on the issues is obtained. 
B)  Issue the audit report and state both the auditor and client positions and the reasons for the disagreement. 
C)  Issue the audit report and omit the client's conclusion as it is not the opinion of the internal auditor. 
D)  Perform additional work, with the client's concurrence, to resolve the areas of disagreement and delay the issuance of the report until agreement is reached.

Question 18

Which of the following would not be characteristic of control self-assessment implemented by an audit department?

Accepted Answer

A)  An auditor usually facilitates the discussion during the workshop phase while another records comments for subsequent use. 
B)  Auditors and business-unit employees work as a team. 
C)  Auditors perform traditional audit tests to identify control weaknesses. 
D)  Participants discuss the control weaknesses that hinder the achievement of objectives. 
A)  An auditor usually facilitates the discussion during the workshop phase while another records comments for subsequent use. 
B)  Auditors and business-unit employees work as a team. 
C)  Auditors perform traditional audit tests to identify control weaknesses. 
D)  Participants discuss the control weaknesses that hinder the achievement of objectives.

Question 19

A chief audit executive agrees to conduct an engagement that will focus on customers' perceptions of the quality of the organization's products and services. Which of the following issues should be addressed first?

Accepted Answer

A)  Cost-effectiveness. 
B)  Quality control. 
C)  Customer complaints. 
D)  Supplier deliveries. 
A)  Cost-effectiveness. 
B)  Quality control. 
C)  Customer complaints. 
D)  Supplier deliveries.

Question 20

An internal auditor for a financial institution has just completed an audit of loan processing. Of the 81 loans approved by the loan committee, the auditor found seven loans which exceeded the approved amount. Which of the following actions would be inappropriate on the part of the auditor?

Accepted Answer

A)  Examine the seven loans to determine if there is a pattern. Summarize amounts and include in the engagement final communication. 
B)  Report the amounts to the loan committee and leave it up to them to correct. Take no further follow-up action at this time and do not include the items in the engagement final communication. 
C)  Follow up with the appropriate vice president and include the vice president's acknowledgment of the situation in the engagement final communication. 
D)  Determine the amount of the differences and make an assessment as to whether the dollar differences are material. If the amounts are not material, not in violation of government regulations, and can be rationally explained, omit the observation from the engagement final communication. 
A)  Examine the seven loans to determine if there is a pattern. Summarize amounts and include in the engagement final communication. 
B)  Report the amounts to the loan committee and leave it up to them to correct. Take no further follow-up action at this time and do not include the items in the engagement final communication. 
C)  Follow up with the appropriate vice president and include the vice president's acknowledgment of the situation in the engagement final communication. 
D)  Determine the amount of the differences and make an assessment as to whether the dollar differences are material. If the amounts are not material, not in violation of government regulations, and can be rationally explained, omit the observation from the engagement final communication.

Which of the following factors could interfere with effective problem solving by an internal auditor?

In a client satisfaction survey for an internal audit engagement, client management should be asked to assess which of the following factors?

A code of ethics within the internal auditing profession is necessary in order to:

It is close to the fiscal year end for a government agency, and the chief audit executive (CAE) has the following items to submit to either the board or the chief executive officer (CEO) for approval. According to IIA guidance, which of the following items should be submitted only to the CEO?

Checklists used to assess audit risk have been criticized for all of the following reasons except:

If an auditor expects to find numerous discrepancies between recorded values and audited values of sample selections, which sampling technique would be most appropriate?

Which of the following statements about internal audit's follow-up process is true?

Which of the following is the most common method management can use to manage risk within its risk appetite?

Which of the following is an advantage to using the questionnaire approach when conducting risk and control self assessments?

According to IIA guidance, which of the following is the least appropriate role for the internal audit activity in the organization's risk management program?

According to IIA guidance, which of the following is true when the internal audit activity is asked to investigate potential ethics violations in a foreign subsidiary?

Why should internal auditors develop a strong relationship with the external auditors?

An internal auditor has completed an audit of an organization's activities and is ready to issue a report. However, the client disagrees with the internal auditor's conclusions. The auditor should:

Which of the following would not be characteristic of control self-assessment implemented by an audit department?

A chief audit executive agrees to conduct an engagement that will focus on customers' perceptions of the quality of the organization's products and services. Which of the following issues should be addressed first?

An internal auditor for a financial institution has just completed an audit of loan processing. Of the 81 loans approved by the loan committee, the auditor found seven loans which exceeded the approved amount. Which of the following actions would be inappropriate on the part of the auditor?

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 factors could interfere with effective problem solving by an internal auditor?

In a client satisfaction survey for an internal audit engagement, client management should be asked to assess which of the following factors?

A code of ethics within the internal auditing profession is necessary in order to:

It is close to the fiscal year end for a government agency, and the chief audit executive (CAE) has the following items to submit to either the board or the chief executive officer (CEO) for approval. According to IIA guidance, which of the following items should be submitted only to the CEO?

Checklists used to assess audit risk have been criticized for all of the following reasons except:

If an auditor expects to find numerous discrepancies between recorded values and audited values of sample selections, which sampling technique would be most appropriate?

Which of the following statements about internal audit's follow-up process is true?

Which of the following is the most common method management can use to manage risk within its risk appetite?

Which of the following is an advantage to using the questionnaire approach when conducting risk and control self assessments?

According to IIA guidance, which of the following is the least appropriate role for the internal audit activity in the organization's risk management program?

According to IIA guidance, which of the following is true when the internal audit activity is asked to investigate potential ethics violations in a foreign subsidiary?

Why should internal auditors develop a strong relationship with the external auditors?

An internal auditor has completed an audit of an organization's activities and is ready to issue a report. However, the client disagrees with the internal auditor's conclusions. The auditor should:

Which of the following would not be characteristic of control self-assessment implemented by an audit department?

A chief audit executive agrees to conduct an engagement that will focus on customers' perceptions of the quality of the organization's products and services. Which of the following issues should be addressed first?

An internal auditor for a financial institution has just completed an audit of loan processing. Of the 81 loans approved by the loan committee, the auditor found seven loans which exceeded the approved amount. Which of the following actions would be inappropriate on the part of the auditor?

Certified Financial Services Auditor

Certified Government Auditing Professional

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

Business Analysis and Information Technology

Filters