Which of the following internal audit assessments belong to specific governance processes? All of the following provide effective relationships in the organization’s governance framework except:

Internal control over financial reporting

Which of the following is the major purpose of performing analytical procedures in internal audits?

To perform additional audit procedures

To study relationships among elements of information

An internal auditor is auditing the financial operations of an organization. Which of the following is not specified in the standards for inclusion in the scope of the audit?

Reviewing the financial decision-making process

Reviewing the reliability and integrity of financial and operational information

Reviewing the compliance with laws, regulations, policies, procedures, and contracts

Appraising the effectiveness and efficiency of operations and programs

The audit committee of an organization has charged the chief audit executive (CAE) with bringing the department into full compliance with the standards. The CAE’s first task is to develop a charter. Identify the item that should be included in the statement of objectives:

Determine the adequacy and effectiveness of the organization’s systems of internal controls

Report all audit findings to the audit committee every quarter

Notify governmental regulatory agencies of unethical business practices by organization management

Submit departmental budget variance reports to management every month

If an auditee’s operating standards are vague and thus subject to interpretation, the auditor should:

Seek agreement with the auditee as to the standards to be used to measure operating performance

Determine best practices in this area and use them as the standard

Interpret the standards in their strictest sense because standards are otherwise only minimum measures of acceptance

Omit any comments on standards and the auditee’s performance in relationship to those standards, because such an analysis would be meaningless.

In which of the following situations does the auditor potentially lack objectivity?

A former purchasing assistant performs a review of internal controls over purchasing four months after being transferred to the internal auditing department

An auditor reviews the procedures for a new electronic data interchange connection to a major customer before it is implemented

An auditor recommends standards of control and performance measures for a contract with a service organization for the processing of payroll and employee benefits

A payroll accounting employee assists an auditor in verifying the physical inventory of small motors

Which of the following actions would be a violation of auditor independence?

Continuing on an audit assignment at a division for which the auditor will soon be responsible as the result of a promotion

Reducing the scope of an audit due to budget restrictions

Participating on a task force which recommends standards for control of a new distribution system

Reviewing a purchasing agent’s contract drafts prior to their execution

A Certified Internal Auditor (CIA) is working in a non–internal audit position as the director of purchasing. The CIA signs a contract to procure a large order from the supplier with the best price, quality, and performance. Shortly after signing the contract, the supplier presents the CIA with a gift of significant monetary value. Which of the following statements regarding the acceptance of the gift is correct?

Acceptance of the gift would violate the IIA Code of Ethics and would be prohibited for a CIA

Acceptance of the gift would be prohibited only if it were noncustomary

Since the CIA is no longer acting as an internal auditor, acceptance of the gift would be governed only by the organization’s code of conduct

Since the contract was signed before the gift was offered, acceptance of the gift would not violate either the IIA Code of Ethics or the organization’s code of conduct

An auditor, nearly finished with an audit, discovers that the director of marketing has a gambling habit. The gambling issue is not directly related to the existing audit, and there is pressure to complete the current audit. The auditor notes the problem and passes the information on to the chief audit executive but does no further follow-up. The auditor’s actions would:

Not be in violation of either the IIA Code of Ethics or the Standards

Be in violation of the IIA Code of Ethics for withholding meaningful information

Be in violation of the Standards because the auditor did not properly follow-up on a red flag that might indicate the existence of fraud

Which of the following situations would be a violation of the Auditors Code of Ethics?

During an audit, an auditor learned that the company was about to introduce a new product that would revolutionize the industry. Because of the probable success of the new product, the product manager suggested that the auditor buy additional stock in the company, which the auditor did.

An auditor was subpoenaed in a court case in which a merger partner claimed to have been defrauded by the auditor’s company. The auditor divulged confidential audit information to the court

An auditor for a manufacturer of office products recently completed an audit of the corporate marketing function. Based on this experience, the auditor spent several hours one Saturday working as a paid consultant to a hospital in the local area, which intended to conduct an audit of its marketing function

An auditor gave a speech at a local chapter meeting outlining the contents of a program the auditor had developed for auditing electronic data interchange connections. Several auditors from major competitors were in the audience

In applying the standards of conduct set forth in the Code of Ethics, internal auditors are expected to:

Exercise their individual judgment

Compare them to standards in other professions

Be guided by the desires of the auditee

Use discretion in deciding whether to use them or not

To be successful, large companies must develop means to keep the organization focused in the proper direction. Organization control systems help keep companies focused. These control systems consist of which of the following components?

Objectives, standards, and an evaluation-reward system

Budgeting, financial ratio analysis, and cash management

Role analysis, team building, and survey feedback

Coaching, protection, and challenging assignments

Residual risk is calculated as which of the following?

Potential risks minus covered risks

Known risks minus unknown risks

Actual risks minus probable risks

Probable risks minus possible risks

The internal audit charter normally requires the internal audit activity to focus on areas consisting of which of the following?

High inherent risk and high residual risk

High audit risk and high current risk

Low inherent risk and low audit risk

Low inherent risk and high outstanding risk

Internal auditors would be more likely to detect fraud if they developed/strengthened their ability to:

Recognize and question changes which occur in organizations

Interrogate fraud perpetrators to discover why the fraud was committed

Develop internal controls to prevent the occurrence of fraud

Document computerized operating system programs

A company hired a highly qualified accounts payable manager who had been terminated from another company for alleged wrongdoing. Six months later, the manager diverted $12,000 by sending duplicate payments of invoices to a relative. A control that might have prevented this situation would be to:

Adequately check prior employment backgrounds for all new employees

Not hire individuals who appear overqualified for a job

Verify educational background for all new employees

Check to see if close relatives work for vendors

When conducting interviews during the early stages of an internal audit, it is more effective to:

Ask surprise questions about daily procedures

Ask for specific answers that can be quantified

Take advantage of the fact that fear is an important part of the audit

An auditor prepared a working paper that consisted of a list of employee names and identification numbers as well as this statement: “By matching random numbers with employee identification numbers, 40 employee personnel files were selected to verify that they contain all documents required by company policy 501. No exceptions were noted.” The auditor did not place any tick marks on this working paper. Which one of the following changes would improve the auditor’s working paper the most?

Justification for the sample size

Use of tick marks to show that each file was examined

Removal of the employee names to protect their confidentiality

Listing of the actual documents examined for each employee

An auditor becomes concerned that fraud in the form of payments to bogus companies may exist. Buyers, who are responsible for all purchases for specific product lines, are able to approve expenditures up to $50,000 without any other approval. Which of the following audit procedures would be most effective in addressing the auditor’s concerns?

Use generalized audit software to take a random sample of all expenditures under $50,000 to determine whether they were properly approved

Use generalized audit software to list all purchases over $50,000 to determine whether they were properly approved

Develop a snapshot technique to trace all transactions by suspected buyers

Justification for the sample size

An auditor wishes to determine the extent to which invalid data could be contained in a human resources computer system. Examples would be an invalid job classification, age in excess of retirement age, or an invalid ethnic classification. The best approach to determine the extent of the potential problem would be to:

Use generalized audit software to develop a detailed report of all data outside specified parameters

Submit test data to test the effectiveness of edit controls over the input of data

Review and test access controls to ensure that access is limited to authorized individuals

Use generalized audit software to select a sample of employees. Use the sample to determine the validity of data items and project the result to the population as a whole

28) An internal auditor plans to use an analytical review to verify the correctness of various operating expenses in a division. The use of an analytical review as a verification technique would not be a preferred approach if:

The auditor notes strong indicators of a specific fraud involving this account

The company has relatively stable operations that have not changed much over the past year

The auditor would like to identify large, unusual, or nonrecurring transactions during the year

The operating expenses vary in relation to other operating expenses but not in relation to revenue

During an audit, the internal auditor should consider the following factor(s) in determining the extent to which analytical procedures should be used:

Adequacy of the system of internal control

Significance of the area being examined

Precision with which the results of analytical audit procedures can be predicted

An auditor performs an analytical review by comparing the gross margins of various divisional operations with those of other divisions and with the individual division’s performance in previous years. The auditor notes a significant increase in the gross margin at one division. The auditor does some preliminary investigation and also notes that there were no changes in products, production methods, or divisional management during the year. Based on this information, the most likely cause of the increase in gross margin would be:

An overstatement of year-end inventory

An increase in the number of competitors selling similar products

A decrease in the number of suppliers of the material used in manufacturing the product

An understatement of year-end accounts receivable

During an operational audit, an auditor compares the inventory turnover rate of a subsidiary with established industry standards in order to:

Assess the performance of the subsidiary and indicate where additional audit work may be needed

Evaluate the accuracy of the subsidiary’s internal financial reports

Test the subsidiary’s controls designed to safeguard assets

Determine if the subsidiary is complying with corporate procedures regarding inventory levels

Of the following, which is the most efficient source for an auditor to use to evaluate a company’s overall control system?

Copies of standard operating procedures

A narrative describing departmental history, activities, and forms usage

Copies of industry operating standards

In documenting the procedures used by several interacting departments, the internal auditor will most likely use:

An internal control questionnaire

The auditor wishes to test the assertion that all claims paid by a medical insurance company contain proper authorization and documentation, including but not limited to the validity of the claim from an approved physician and an indication that the claim complies with the claimant’s policy. The most appropriate audit procedure would be to:

Select a sample of paid claims from the claims (cash) disbursement file and trace to documentary evidence of authorization and other supporting documentation

Select a random statistical sample of all policyholders and examine all claims for the sampled items during the year to determine if they were handled properly

Select a sample of claims filed and trace to documentary evidence of authorization and other supporting documentation

Select a sample of claims denied and determine that all claims denied were appropriate. The claims denied file is much smaller, and the auditor can obtain greater coverage with the sample size

In evaluating the validity of different types of audit evidence, which one of the following conclusions is incorrect?

The validity of documentary evidence is independent of the effectiveness of the control system in which it was created

Recomputation, although highly valid, is limited in usefulness due to its limited scope

Internally created documentary evidence is considered less valid than externally created documentary evidence

The validity of confirmations varies directly with the independence of the party receiving the confirmation

In testing the write-off of a deteriorated piece of equipment, the best evidence of the condition of the equipment would be:

A physical inspection of the actual piece of equipment

The equipment manager’s statement regarding condition

Accounting records showing maintenance and repair costs

The production department’s equipment downtime report

Which of the following audit procedures provides the best evidence about the collectability of notes receivable?

Examination of cash receipts records to determine promptness of interest and principal payments

Confirmation of note receivable balances with the debtors

Examination of notes for appropriate debtors’ signatures

Reconciliation of the detail of notes receivable and the provision for uncollectible amounts to the general ledger control

When sampling methods are used, the concept of sufficiency of evidence means that the samples selected provide:

Reasonable assurance that they are representative of the sampled population

The best evidence that is reasonably obtainable

Reasonable assurance that the evidence has a logical relationship to the audit objective

Absolute assurance that a sample is representative of the population

Which of the following is true of a horizontal flowchart as compared to a vertical flowchart?

It brings into sharper focus the assignment of duties and independent checks on performance

It provides more room for written descriptions that parallel the symbols

It does not provide as broad a picture at a glance

What is the complete name of your subject teacher in IS 224?

Jessica Rose E. Fernandez, Ph.EdD

Jessica Rose E. Hernandez, Ph.EdD

IS 224_Midterm Exam

Authored by Jessica Fernandez

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50 questions

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MULTIPLE CHOICE QUESTION

45 sec • 1 pt

Which of the following adds value to the others?

Governance processes

Risk management processes

Internal audit activities

Control processes

MULTIPLE CHOICE QUESTION

45 sec • 1 pt

All of the following are examples of assurance services except:

Financial engagement

Compliance engagement

Due diligence engagement

Training engagement

MULTIPLE CHOICE QUESTION

45 sec • 1 pt

All of the following are examples of consulting services except:

Legal counsel engagement

System security engagement

Advice engagement

Facilitation engagement

MULTIPLE CHOICE QUESTION

45 sec • 1 pt

Which of the following is driving the need for assurance maps?

Risk managers

Board members

Internal auditors

Compliance practitioners

MULTIPLE CHOICE QUESTION

45 sec • 1 pt

Risk registers describe direct links between which of the following?

Risk acceptance and risk avoidance

Risk categories and risk aspects

Risk assignment and risk sharing

Risk limitation and risk spreading

MULTIPLE CHOICE QUESTION

45 sec • 1 pt

The chief audit executive establishes a method for prioritizing all of the following except:

Business units with low risk levels

Branch or field office with low risk levels

Outstanding risk areas

Low inherent risk areas

MULTIPLE CHOICE QUESTION

45 sec • 1 pt

All of the following provide effective relationships in the organization’s governance framework except:

Organizational processes

Governance

Risk management

Internal controls

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IS 224_Midterm Exam

Which of the following adds value to the others?

All of the following are examples of assurance services except:

All of the following are examples of consulting services except:

Which of the following is driving the need for assurance maps?

Risk registers describe direct links between which of the following?

The chief audit executive establishes a method for prioritizing all of the following except:

All of the following provide effective relationships in the organization’s governance framework except:

Which of the following internal audit assessments belong to specific governance processes?
All of the following provide effective relationships in the organization’s governance framework except:

Ensuring internal audit teams have the right competencies with right level of work experience and designing effective internal audit procedures can reduce the risk of which of the following?

Consulting engagement objectives must be consistent with all of the following except:

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IS 224_Midterm Exam

Which of the following adds value to the others?

All of the following are examples of assurance services except:

All of the following are examples of consulting services except:

Which of the following is driving the need for assurance maps?

Risk registers describe direct links between which of the following?

The chief audit executive establishes a method for prioritizing all of the following except:

All of the following provide effective relationships in the organization’s governance framework except:

Which of the following internal audit assessments belong to specific governance processes?All of the following provide effective relationships in the organization’s governance framework except:

Ensuring internal audit teams have the right competencies with right level of work experience and designing effective internal audit procedures can reduce the risk of which of the following?

Consulting engagement objectives must be consistent with all of the following except:

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Similar Resources on Wayground

Popular Resources on Wayground

Discover more resources for Computers

Which of the following internal audit assessments belong to specific governance processes?
All of the following provide effective relationships in the organization’s governance framework except: