INTERNAL AUDIT CH1

What is the definition of Internal Auditing according to the Institute of Internal Auditors?

• A means to identify problems after they have occurred.

• An independent, objective assurance and consulting activity adding value and improving operations.

• A process to monitor operations and identify errors and abnormalities.

• A tool to give a reasonable assurance that laws and regulations are followed.

What is the purpose of the Audit Committee?

• To manage the organization's relationships and culture.

• To assess the effectiveness of internal controls and risk management.

• To conduct internal audits and provide advisory services.

• To provide oversight of financial statement integrity, legal and regulatory compliance, and auditor's qualifications.

What is the main advantage of audit automation?

• Build customized analytics to test key controls automatically on a timely basis.

• Conduct manual data analysis to identify errors.

• Ensure physical safeguards and security in the organization.

• Distribute audit results manually.

What is the purpose of a Quality Assurance Review (QAR)?

• To manage the organization's relationships and culture.

• To assess conformance with standards and effectiveness of consulting.

• To provide oversight of financial reporting and compliance.

• To conduct risk assessments and internal audits.

What is the key for success in internal auditing according to the text?

• Conduct audits based on intuition rather than data analysis.

• Avoid partnering with management and auditees to maintain independence.

• Ignore feedback and avoid making improvements based on it.

• Stay in tune with the organization's risk priorities and take a risk-based approach to audit planning.

What is the main attribute of the Control Environment according to the text?

• Management methods of control, effectiveness of policies and procedures, and organizational structure.

• Physical safeguards and security, error handling, and segregation of duties.

• Judgment, breakdowns, management override, and collusion.

• Authorization, completeness, accuracy, and validity.

What is the purpose of Internal Controls in a business environment?

• To identify problems after they have occurred.

• To assist in achieving the orderly and efficient conduct of the entity's business.

• To provide assurance that internal controls are sufficient to mitigate risks.

• To ensure that all transactions are approved by responsible personnel.

What is the main objective of Internal Control related to Authorization?

• To ensure that access to physical assets and information systems is controlled.

• To ensure that all valid transactions are accurate and recorded in a timely manner.

• To ensure that no valid transactions have been omitted from the accounting records.

• To ensure that all transactions are approved by responsible personnel before being recorded.

What is the difference between Preventive and Detective Controls?

• Preventive controls are manual, while Detective controls are automated.

• Preventive controls are designed to correct errors, while Detective controls are proactive.

• Preventive controls identify a problem after it has occurred, while Detective controls prevent irregularities.

• Preventive controls discourage errors or prevent irregularities, while Detective controls identify a problem after it has occurred.

What is the main advantage of using Preventive Controls in a business environment?

• They identify a problem after it has occurred.

• They are designed to monitor operations and identify errors.

• They discourage errors or prevent irregularities from occurring.

• They are intended to avoid unwanted events from occurring.