Question 1

Which of the following is least likely to vary when conducting audit engagements in different regions of an international organization?

Accepted Answer

A)  Application of governmental regulations to business activities. 
B)  Work schedules and holidays of the individual regions. 
C)  Level of workpaper documentation needed to support audit observations. 
D)  Availability of technology and technical support. 
A)  Application of governmental regulations to business activities. 
B)  Work schedules and holidays of the individual regions. 
C)  Level of workpaper documentation needed to support audit observations. 
D)  Availability of technology and technical support.

Question 2

Which of the following conditions is the strongest indicator of possible fraud?

Accepted Answer

A)  An assistant treasurer who refuses to take vacations. 
B)  Independent reconciliations of subsidiary to general ledgers that are not always completed on a timely basis. 
C)  A condition of excess manufacturing waste material. 
D)  A manager who is often over budget at the end of a reporting period. 
A)  An assistant treasurer who refuses to take vacations. 
B)  Independent reconciliations of subsidiary to general ledgers that are not always completed on a timely basis. 
C)  A condition of excess manufacturing waste material. 
D)  A manager who is often over budget at the end of a reporting period.

Question 3

Which of the following components should be included in an audit finding? 1. The scope of the audit. 2. The standard(s) used by the auditor to make the evaluation. 3. The engagement's objectives. 4. The factual evidence that the internal auditor found in the course of the examination.

Accepted Answer

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

Question 4

While preparing the annual audit plan, the newly assigned chief audit executive (CAE) learns that the organization has not yet implemented a risk framework. Which of the following would be the most appropriate action for the CAE to take regarding potential engagements?

Accepted Answer

A)  Prioritize the engagements that were not done in previous years and schedule them for the upcoming year. 
B)  Consult with senior management and the board and make adjustments regarding risk. 
C)  Review all outstanding recommendations from prior audit engagements and focus on them in the upcoming year. 
D)  Use the previous three-year audit plan to extrapolate potential engagements for the upcoming year's schedule of engagement. 
A)  Prioritize the engagements that were not done in previous years and schedule them for the upcoming year. 
B)  Consult with senior management and the board and make adjustments regarding risk. 
C)  Review all outstanding recommendations from prior audit engagements and focus on them in the upcoming year. 
D)  Use the previous three-year audit plan to extrapolate potential engagements for the upcoming year's schedule of engagement.

Question 5

Ordinarily, which of the following would not be an objective of an internal audit quality assurance review?

Accepted Answer

A)  Ensuring that the internal audit activity meets the external auditor's expectations. 
B)  Ensuring that the internal audit activity has an audit charter approved by the board of directors. 
C)  Complying with specific standards for the professional practice of internal auditing. 
D)  Ensuring the adequacy of the goals, mission and vision of the internal audit activity. 
A)  Ensuring that the internal audit activity meets the external auditor's expectations. 
B)  Ensuring that the internal audit activity has an audit charter approved by the board of directors. 
C)  Complying with specific standards for the professional practice of internal auditing. 
D)  Ensuring the adequacy of the goals, mission and vision of the internal audit activity.

Question 6

A fast-food company is developing a computer simulation involving arrival time at a drive-through restaurant. The distribution for arrival times is: Time Single-Digit Random Between Arrivals Probability Number Assigned 1 minute 0.1 0 2 minutes 0.2 1, 2 3 minutes 0.3 3, 4, 5 4 minutes 0.4 6, 7, 8, 9 Six random numbers are selected to represent the arrival of six cars: 1, 6, 9, 0, 5, 6. The mean time between arrivals for these cars, in this run of the simulation model, is:

Accepted Answer

A)  1 minute. 
B)  2 minutes. 
C)  3 minutes. 
D)  4 minutes. 
A)  1 minute. 
B)  2 minutes. 
C)  3 minutes. 
D)  4 minutes.

Question 7

The use of standard operating procedure questionnaires in audit fieldwork can be beneficial because.

Accepted Answer

A)  These questionnaires can both identify discrepancies and educate clients. 
B)  Standard operating procedures are essential to the effectiveness and efficiency of operations. 
C)  These questionnaires are more comprehensive than are other types of techniques for gathering data during fieldwork. 
D)  These questionnaires do not normally require prior clearance with management of the audited area. 
A)  These questionnaires can both identify discrepancies and educate clients. 
B)  Standard operating procedures are essential to the effectiveness and efficiency of operations. 
C)  These questionnaires are more comprehensive than are other types of techniques for gathering data during fieldwork. 
D)  These questionnaires do not normally require prior clearance with management of the audited area.

Question 8

Which of the following data sources would provide the least valid data for an audit of a retail store's customer service?

Accepted Answer

A)  A graph that compares staffing levels for selected times with store traffic (number of customers) over the same time period. 
B)  A random survey of customer satisfaction given to customers as they leave the store. 
C)  Interviews of randomly selected service personnel regarding the quality of service that they provide. 
D)  A graph of customer service training across stores, comparing training with overall levels of service satisfaction. 
A)  A graph that compares staffing levels for selected times with store traffic (number of customers) over the same time period. 
B)  A random survey of customer satisfaction given to customers as they leave the store. 
C)  Interviews of randomly selected service personnel regarding the quality of service that they provide. 
D)  A graph of customer service training across stores, comparing training with overall levels of service satisfaction.

Question 9

According to IIA guidance, which of the following statements is true regarding the authority of the chief audit executive (CAE) to release previous audit reports to outside parties?

Accepted Answer

A)  The CAE can release prior internal audit reports with the approval of the board and senior management. 
B)  The CAE can employ judgment and release prior audit results as they deem appropriate and necessary. 
C)  The CAE can only release prior information outside the organization when mandated by legal or statutory requirements. 
D)  The CAE can release prior information provided it is as originally published and distributed within the organization. 
A)  The CAE can release prior internal audit reports with the approval of the board and senior management. 
B)  The CAE can employ judgment and release prior audit results as they deem appropriate and necessary. 
C)  The CAE can only release prior information outside the organization when mandated by legal or statutory requirements. 
D)  The CAE can release prior information provided it is as originally published and distributed within the organization.

Question 10

During which of the following systems development stages would it be most useful for an internal auditor to be involved?

Accepted Answer

A)  Coding and testing. 
B)  User acceptance and post-implementation. 
C)  Design and implementation. 
D)  Testing and user acceptance. 
A)  Coding and testing. 
B)  User acceptance and post-implementation. 
C)  Design and implementation. 
D)  Testing and user acceptance.

Question 11

Once an audit report is drafted, the auditor's supervisor should review it primarily to ensure that all:

Accepted Answer

A)  Statements are supported and can be authenticated. 
B)  Recommendations for corrective action are clear. 
C)  Processes within the audited area were reviewed. 
D)  Sample sizes appear appropriate for any issues found. 
A)  Statements are supported and can be authenticated. 
B)  Recommendations for corrective action are clear. 
C)  Processes within the audited area were reviewed. 
D)  Sample sizes appear appropriate for any issues found.

Question 12

A retail company uses a computer program that matches electronic vendor invoices with the applicable purchase orders and receiving information, which are also maintained electronically. If an invoice does not match the other items within predefined ranges, a report is generated and sent to the accounts payable department for further investigation. All of the applicable documents are electronically marked, cross-referenced, and retained in open files. Both an integrated test facility and a systems control audit review file (SCARF) have been included in the system. An auditor wants to determine the extent to which items are not matched at year end and to investigate the potential causes of the unmatched items. Which of the following audit procedures would be most effective in determining the items to investigate?

Accepted Answer

A)  Use generalized audit software to read the electronically marked unmatched items. 
B)  Use generalized audit software to read the purchase orders and trace to applicable receiving and vendor invoice files. 
C)  Use the SCARF to identify unusual items. Select an attributes sample and trace to the underlying documentation. 
D)  Submit test data to identify attributes of unmatched items. Follow up by investigating the identified attributes. 
A)  Use generalized audit software to read the electronically marked unmatched items. 
B)  Use generalized audit software to read the purchase orders and trace to applicable receiving and vendor invoice files. 
C)  Use the SCARF to identify unusual items. Select an attributes sample and trace to the underlying documentation. 
D)  Submit test data to identify attributes of unmatched items. Follow up by investigating the identified attributes.

Question 13

While conducting an audit of a third party's Web-based payment processor, an internal auditor discovers that a programming error allows customers to create multiple accounts for a single mailing address. Management agrees to correct the program and notify customers with multiple accounts that the accounts will be consolidated. Which of the following actions should the auditor take? 1. Schedule a follow-up review to verify that the program was corrected and the accounts were consolidated. 2. Evaluate the adequacy and effectiveness of the corrective action proposed by management. 3. Amend the scope of the subsequent audit to verify that the program was corrected and that accounts were consolidated. 4. Submit management's plan of action to the external auditors for additional review.

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 14

If observed during fieldwork by an internal auditor, which of the following activities is least important to communicate formally to the chief audit executive?

Accepted Answer

A)  Acts that may endanger the health or safety of individuals. 
B)  Acts that favor one party to the detriment of another. 
C)  Acts that damage or have an adverse effect on the environment. 
D)  Acts that conceal inappropriate activities in the organization. 
A)  Acts that may endanger the health or safety of individuals. 
B)  Acts that favor one party to the detriment of another. 
C)  Acts that damage or have an adverse effect on the environment. 
D)  Acts that conceal inappropriate activities in the organization.

Question 15

An internal auditor compares real-time gasoline production data to corresponding final gasoline production reports and finds minor but consistent daily discrepancies. If the auditor is concerned about theft, which of the following next steps is most consistent with IIA guidance?

Accepted Answer

A)  Reconcile online data and the final production reports to gasoline sales reports. 
B)  Contact security personnel as evidence suggests gasoline is being stolen from production premises. 
C)  Confront the production manager and ask her to explain the differences between real-time and reported data. 
D)  Review the processes used to collect the production data and to compile the final production reports. 
A)  Reconcile online data and the final production reports to gasoline sales reports. 
B)  Contact security personnel as evidence suggests gasoline is being stolen from production premises. 
C)  Confront the production manager and ask her to explain the differences between real-time and reported data. 
D)  Review the processes used to collect the production data and to compile the final production reports.

Question 16

While performing a follow-up of a concern about equipment-inventory tracking, which course of action is not necessary for the auditor to take?

Accepted Answer

A)  Ensure that the steps being taken resolve the condition disclosed by the initial finding. 
B)  Ensure that controls have been implemented to prevent the issue from occurring again. 
C)  Ensure that the entity has begun to experience benefits as a result of resolving the issue. 
D)  Ensure that the inherent risk has been eliminated as a result of resolving the issue. 
A)  Ensure that the steps being taken resolve the condition disclosed by the initial finding. 
B)  Ensure that controls have been implemented to prevent the issue from occurring again. 
C)  Ensure that the entity has begun to experience benefits as a result of resolving the issue. 
D)  Ensure that the inherent risk has been eliminated as a result of resolving the issue.

Question 17

What is the most important risk in determining the validity of construction delay claims?

Accepted Answer

A)  Contractor claims may be submitted prior to completion of the work. 
B)  Contractor claims may include costs considered in the fixed-price portion of the work. 
C)  Contractor claims may include subcontractor estimates of balances due to the subcontractor. 
D)  Contractor claims may be understated. 
A)  Contractor claims may be submitted prior to completion of the work. 
B)  Contractor claims may include costs considered in the fixed-price portion of the work. 
C)  Contractor claims may include subcontractor estimates of balances due to the subcontractor. 
D)  Contractor claims may be understated.

Question 18

Which of the following are typical steps in the design of an organization's performance measurement system?

Accepted Answer

A)  Understand organizational strategy; perform a situational assessment; establish measurement categories; and take actions based upon measurement results. 
B)  Categorize performance measures; establish a data collection plan; analyze data; and predict future performance. 
C)  Establish a measurement plan; create an organizational strategy linked to those measurements; trend measurement data; and measure data variability. 
D)  Perform a situational assessment; generate macro measurements; review measurement data; and change strategy based upon measurement results. 
A)  Understand organizational strategy; perform a situational assessment; establish measurement categories; and take actions based upon measurement results. 
B)  Categorize performance measures; establish a data collection plan; analyze data; and predict future performance. 
C)  Establish a measurement plan; create an organizational strategy linked to those measurements; trend measurement data; and measure data variability. 
D)  Perform a situational assessment; generate macro measurements; review measurement data; and change strategy based upon measurement results.

Question 19

Which two of the following considerations must an internal auditor take into account while planning an audit of an accounting system/application that has been in use for the last five years? • The level and manner of linkages between the business' mission, objectives, and structure and the accounting system/application. • Presence or absence of computerized and manual controls that address risks. • Identification of risks at the application level, e.g. availability and security of the system. • Testing of the system/application for bugs and errors.

Accepted Answer

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

Question 20

Direct staff as a percentage of total staff is an example of which of the following types of efficiency measures?

Accepted Answer

A)  Productivity ratio. 
B)  Productivity index. 
C)  Operating ratio. 
D)  Resource utilization rate. 
A)  Productivity ratio. 
B)  Productivity index. 
C)  Operating ratio. 
D)  Resource utilization rate.

Which of the following is least likely to vary when conducting audit engagements in different regions of an international organization?

Which of the following conditions is the strongest indicator of possible fraud?

Which of the following components should be included in an audit finding? 1. The scope of the audit. 2. The standard(s) used by the auditor to make the evaluation. 3. The engagement's objectives. 4. The factual evidence that the internal auditor found in the course of the examination.

While preparing the annual audit plan, the newly assigned chief audit executive (CAE) learns that the organization has not yet implemented a risk framework. Which of the following would be the most appropriate action for the CAE to take regarding potential engagements?

Ordinarily, which of the following would not be an objective of an internal audit quality assurance review?

The use of standard operating procedure questionnaires in audit fieldwork can be beneficial because.

Which of the following data sources would provide the least valid data for an audit of a retail store's customer service?

According to IIA guidance, which of the following statements is true regarding the authority of the chief audit executive (CAE) to release previous audit reports to outside parties?

During which of the following systems development stages would it be most useful for an internal auditor to be involved?

Once an audit report is drafted, the auditor's supervisor should review it primarily to ensure that all:

If observed during fieldwork by an internal auditor, which of the following activities is least important to communicate formally to the chief audit executive?

An internal auditor compares real-time gasoline production data to corresponding final gasoline production reports and finds minor but consistent daily discrepancies. If the auditor is concerned about theft, which of the following next steps is most consistent with IIA guidance?

While performing a follow-up of a concern about equipment-inventory tracking, which course of action is not necessary for the auditor to take?

What is the most important risk in determining the validity of construction delay claims?

Which of the following are typical steps in the design of an organization's performance measurement system?

Direct staff as a percentage of total staff is an example of which of the following types of efficiency measures?

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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 least likely to vary when conducting audit engagements in different regions of an international organization?

Which of the following conditions is the strongest indicator of possible fraud?

Which of the following components should be included in an audit finding? 1. The scope of the audit. 2. The standard(s) used by the auditor to make the evaluation. 3. The engagement's objectives. 4. The factual evidence that the internal auditor found in the course of the examination.

While preparing the annual audit plan, the newly assigned chief audit executive (CAE) learns that the organization has not yet implemented a risk framework. Which of the following would be the most appropriate action for the CAE to take regarding potential engagements?

Ordinarily, which of the following would not be an objective of an internal audit quality assurance review?

The use of standard operating procedure questionnaires in audit fieldwork can be beneficial because.

Which of the following data sources would provide the least valid data for an audit of a retail store's customer service?

According to IIA guidance, which of the following statements is true regarding the authority of the chief audit executive (CAE) to release previous audit reports to outside parties?

During which of the following systems development stages would it be most useful for an internal auditor to be involved?

Once an audit report is drafted, the auditor's supervisor should review it primarily to ensure that all:

If observed during fieldwork by an internal auditor, which of the following activities is least important to communicate formally to the chief audit executive?

An internal auditor compares real-time gasoline production data to corresponding final gasoline production reports and finds minor but consistent daily discrepancies. If the auditor is concerned about theft, which of the following next steps is most consistent with IIA guidance?

While performing a follow-up of a concern about equipment-inventory tracking, which course of action is not necessary for the auditor to take?

What is the most important risk in determining the validity of construction delay claims?

Which of the following are typical steps in the design of an organization's performance measurement system?

Direct staff as a percentage of total staff is an example of which of the following types of efficiency measures?

Certified Financial Services Auditor

Certified Government Auditing Professional

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

Business Analysis and Information Technology

Filters