Question 1

A code of business conduct should include which of the following to increase its deterrent effect? 1. Appropriate descriptions of penalties for misconduct. 2. A notification that code of conduct violations may lead to criminal prosecution. 3. A description of violations that injure the interests of the employer. 4. A list of employees covered by the code of conduct.

Accepted Answer

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

Question 2

In reviewing the appropriateness of the minimum quantity level of inventory established by a department, an auditor would be least likely to consider:

Accepted Answer

A)  Stockout costs, including lost customers. 
B)  Seasonal variations in forecasting inventory demand. 
C)  Optimal order sizes determined by an economic order quantity model. 
D)  The potential for obsolescence of inventory items.

Question 3

The internal audit activity of an investment company received a request to provide assurance on the risk management process. Preliminary discussion with senior management revealed that separate functions within the organization perform some form of risk management activities. Which of the following is the most effective tool for ensuring that risk management activities are coordinated among these functions?

Accepted Answer

A)  Delphi technique. 
B)  Assurance map. 
C)  Facilitated workshop. 
D)  Analytical reviews.

Question 4

A company has recently incurred significant cost overruns on one of its construction projects. Management suspects that these overruns were caused by the contractor improperly accounting for costs related to contract change orders. Which of the following procedures would be appropriate for testing this suspicion?

Accepted Answer

A)  Verify that the contractor has not charged change orders with costs that have already been billed to the original contract. II. Determine if the contractor has billed for original contract work that was canceled as a result of change orders. III. Verify that the change orders were properly approved by management. 
B)  I only 
C)  III only 
D)  I and II only 
E)  I and III only

Question 5

According to the International Professional Practices Framework, which of the following is correct regarding conducting and reporting follow-up activities by the internal audit activity (IAA)?

Accepted Answer

A)  Due to management changes, the IAA is advised by management that no further work will be done. Further follow-up work is not required as management has accepted the related risk. 
B)  A newly appointed auditor immediately proceeds to conduct follow-up testing based on previous work performed for the engagement and then reports the results to the chief audit executive (CA
E) . 
C)  Management has stopped implementing several key recommendations citing a growing disagreement with their effectiveness. The auditor communicates the situation to the CAE who then escalates the matter to senior management. 
D)  In situations where the identified risk may have a significant impact to the business and senior management has accepted the risk, it is not necessary for the CAE to inform the board of the decision.

Question 6

An organization's internal auditors are reviewing production costs at a gas-powered electrical generating plant. They identify a serious problem with the accuracy of carbon dioxide emissions reported to the environmental regulatory agency, due to computer errors. The auditors should immediately report the concern to:

Accepted Answer

A)  The regulatory agency. 
B)  Plant management. 
C)  A plant health and safety officer. 
D)  The risk management function.

Question 7

Recommendations should be included in the audit report in order to:

Accepted Answer

A)  Provide management with options for addressing audit findings. 
B)  Ensure that audit findings are resolved in the manner suggested by the auditor. 
C)  Minimize the amount of time required to correct audit findings. 
D)  Ensure that audit findings are addressed by management.

Question 8

The board has asked the internal audit activity (IAA) to be involved in the organization's enterprise risk management process. Which of the following activities is appropriate for IAA to perform without safeguards?

Accepted Answer

A)  Coach management in responding to risks. 
B)  Develop risk management strategies for board approval. 
C)  Facilitate identification and evaluation of risks. 
D)  Evaluate risk management processes.

Exam 4: Conducting the Internal Audit Engagement

In reviewing the appropriateness of the minimum quantity level of inventory established by a department, an auditor would be least likely to consider:

According to the International Professional Practices Framework, which of the following is correct regarding conducting and reporting follow-up activities by the internal audit activity (IAA) ?

Recommendations should be included in the audit report in order to:

The board has asked the internal audit activity (IAA) to be involved in the organization's enterprise risk management process. Which of the following activities is appropriate for IAA to perform without safeguards?