IIA-CIA-Part1: Certified Internal Auditor – Part 1 The Internal Audit Activity Role in Governance Risk and Control

Question #: 61
Topic #: 3
New credit policies have been implemented in an automated order-entry system to improve the collection of receivables. Sales management has compiled several examples that show decreased sales and delayed order entry, and contends that these examples are a direct result of the new credit-policy constraints. Sales management’s data and information provide:

A. Feedback control data.
B. Irrelevant and argumentative information.
C. Evidence that the new credit policies do not meet the stated corporate objective to improve collections.
D. A statistically valid conclusion about the impact of the new credit policies on customer goodwill.

Selected Answer: D

Question #: 61
Topic #: 1
In a manufacturing organization, all sales prices are determined centrally and are electronically sent to the distribution centers to update their sales price tables.
Any pricing deviations must be approved by central headquarters. To determine how this process is functioning, an internal auditor should:

A. Document the flow of sales price information, and determine how the table is accessed and updated.
B. Develop a flowchart of the sales order process to determine how orders are taken and priced.
C. Identify who approves the shipment of goods and how the goods are priced.
D. Obtain a copy of the existing flowchart for the computer program to determine how price data are accessed.

Selected Answer: C

Question #: 62
Topic #: 1
It would be appropriate for an internal audit activity to use consultants with expertise in health-care benefits when the internal audit activity is:
I. Conducting an audit of the organization’s estimate of its liability for post retirement benefits, which include health care benefits.
II. Comparing the cost of the organization’s health care program with that of other programs offered in the industry.
III. Training its staff to conduct an audit of health care costs in a major division of the organization.

A. I only
B. I and III only
C. II and III only
D. I, II, and III.

Selected Answer: B

Question #: 62
Topic #: 2
According to the International Professional Practices Framework, a primary purpose of evaluating the adequacy of an organization’s risk management, control, and governance processes is to determine if it:

A. Was designed to ensure compliance with policies, plans, procedures, laws, and regulations.
B. Provides reasonable assurance that the organization’s objectives will be met.
C. Mitigates inherent risk.
D. Assures the reliability and integrity of information used by management.

Selected Answer: D

Question #: 63
Topic #: 5
According to the Standards, which of the following best describes why initial audit test results should be reported to the auditor-in-charge prior to advising management?

A. It increases the likelihood of obtaining the audit client’s agreement with the results.
B. It ensures that an appropriate chain of evidence is maintained through the workpapers.
C. It helps ensure that appropriate professional judgments and conclusions are made.
D. It is required to demonstrate that effective engagement supervision has occurred.

Selected Answer: B

Question #: 64
Topic #: 3
When comparing an organization’s current performance to that of the prior year, an internal auditor found that:
✑ Total labor costs had increased.
✑ More overtime costs had been incurred.
✑ The total number of workers had increased.
✑ Net income was 10 percent lower.
Based solely on this information, which of the following is a valid conclusion?

A. Net income per worker decreased.
B. Wage rates increased.
C. Worker efficiency decreased.
D. Total labor hours increased.

Selected Answer: A

Question #: 64
Topic #: 5
Which of the following audit techniques is used to evaluate control design while also embodying auditing’s analytical process?

A. A risk and control matrix.
B. A flowchart.
C. A walk-through.
D. A process narrative.

Selected Answer: B

Question #: 64
Topic #: 2
The primary role of the internal audit activity in regard to an organization’s ethical climate is to:

A. Participate as chief ethics officer.
B. Periodically assess the ethical climate.
C. Utilize surveys to evaluate employee ethics.
D. Demonstrate ethical behavior.

Selected Answer: B

Question #: 64
Topic #: 1
Which of the following best describes the most important criteria when assigning responsibility for specific tasks required in an audit engagement?

A. Auditors must be given assignments based primarily upon their years of experience.
B. All auditors assigned an audit task must have the knowledge and skills necessary to complete the task satisfactorily.
C. Tasks must be assigned to the audit team member who is most qualified to perform them.
D. All audit team members must have the skills necessary to satisfactorily complete any task that will be required in the audit engagement.

Selected Answer: C

Question #: 65
Topic #: 4
Which of the following statements regarding an internal auditor’s responsibility for detecting fraud is not correct?

A. The auditor should have sufficient knowledge to detect red flags.
B. The auditor may obtain assistance from outside experts in areas where the auditor is not sufficiently proficient.
C. The auditor should identify control weaknesses which could allow fraud to occur.
D. The auditor should detect fraud before recommending a fraud investigation should take place.

Selected Answer: B

Question #: 66
Topic #: 1
Which of the following steps would not be included in a program of selecting and developing human resources for an internal audit department?

A. Scheduling periodic meetings with individual auditors, during which the chief audit executive provides counsel regarding each auditor’s performance and professional career development.
B. Establishing an internal review team to assess the auditors’ and audit department’s compliance with standards, level of audit effectiveness, and compliance with departmental policy.
C. Developing specific job descriptions for audit staff, audit managers, and other auditing positions.
D. Establishing in-house training programs and requiring continuing education for audit staff.

Selected Answer: A

Question #: 67
Topic #: 5
An internal auditor is reviewing employee travel data to identify opportunities to cut costs while ensuring adequate participation at conferences to support the organization’s mission. Which of the following pieces of evidence would be sufficient for completing this task?

A. A log from the last year that includes dates of travel, conference titles, and conference objectives, all of which correspond with employee names and costs per trip.
B. A log that includes titles of conferences that all employees were invited to attend in the last year, along with the dates of those conferences and average costs per traveler.
C. A log of conferences titles, dates of travel for each employee, and a detailed summary of conference objectives and how they relate to the organization’s mission needs.
D. A log of employee travel requests, which include the title of each conference, the conference objectives, anticipated dates of travel, and estimated costs.

Selected Answer: A

Question #: 67
Topic #: 4
What information should the internal quality assessment of the internal audit activity communicate to the chief audit executive?

A. Detailed objectives for internal audit engagements.
B. Confirmation that past audit recommendations have been implemented.
C. Evaluation of the adequacy of internal audit policies and procedures.
D. Performance appraisals of the internal audit staff.

Selected Answer: A

Question #: 67
Topic #: 1
Auditors 1, 2, and 3 work out of various offices. Each must be assigned to one, and only one, of three audit locations (A, B, or C). The cost of sending each auditor to each location is listed below:

Audit Locations –

Auditor 1 –

A –

B –

C –

Auditor 2 –
$200
$300
$400

Auditor 3 –
$400
$300
$600

Auditor 4 –
$200
$200
$500
The minimum cost with which this assignment can be accomplished is:

A. $800
B. $900
C. $1, 000
D. $1, 100

Selected Answer: B

Question #: 68
Topic #: 1
An audit of the quality control department is being planned. Which of the following would least likely be used in the preparation of a preliminary survey questionnaire?

A. An analysis of quality control documents.
B. The permanent audit file.
C. The prior audit report.
D. Management’s charter for the quality control department.

Selected Answer: A

Question #: 70
Topic #: 5
According to IIA guidance, which of the following statements regarding the internal audit charter is true?

A. Senior management should approve the charter before it is submitted to the board.
B. The charter should describe the purpose and authority of the internal audit activity, consistent with the Standards.
C. The charter should define the consulting services that the internal audit activity is permitted to perform.
D. The CEO periodically should assess whether the terms of the charter continue to be adequate.

Selected Answer: C

Question #: 70
Topic #: 5
According to IIA guidance, which of the following statements regarding the internal audit charter is true?

A. Senior management should approve the charter before it is submitted to the board.
B. The charter should describe the purpose and authority of the internal audit activity, consistent with the Standards.
C. The charter should define the consulting services that the internal audit activity is permitted to perform.
D. The CEO periodically should assess whether the terms of the charter continue to be adequate.

Selected Answer: C

Question #: 70
Topic #: 4
Which of the following statements correctly describes how workpaper standards can improve the efficiency of internal audit operations?

A. They require supervisors to provide written confirmation of the workpapers they review.
B. They grant external parties approved by management access to workpapers.
C. They mandate the workpaper retention period.
D. They allow the design and content to vary depending on the nature of the engagement.

Selected Answer: A

Question #: 70
Topic #: 1
Which of the following internal control weaknesses would an auditor most likely detect while reviewing a flowchart that depicts the purchasing function of an organization?

A. Purchasing policies have not been updated.
B. The organization is not taking advantage of quantity discounts available from its suppliers.
C. Payments for goods received have not been authorized at the appropriate level.
D. Payments to suppliers are made before goods are received.

Selected Answer: C

Question #: 70
Topic #: 3
A production division received 45 responses to a customer-service survey distributed to 100 purchasing departments randomly selected from all customers who made purchases in the prior 12 months. Which of the following is the most likely reason that the division manager would be concerned about nonresponse bias in this situation?

A. The sample means and standard errors are more difficult to compute.
B. Those who did not respond may be systematically different from those who did.
C. The sample size is too small.
D. Confidence intervals are narrower.

Selected Answer: A

Question #: 72
Topic #: 1
Internal auditors exercise judgment about the type and amount of information to be collected. The primary purpose of this judgment is to:

A. Eliminate the risk of drawing incorrect conclusions.
B. Minimize the cost of the audit engagement.
C. Comply with the Standards.
D. Provide a sound basis for audit observations and recommendations.

Selected Answer: C

Question #: 74
Topic #: 1
Which of the following would be the least desirable criteria against which to judge current operations of a company’s treasury function?

A. The operations of the treasury function as documented during the last audit engagement.
B. Company policies and procedures delegating authority and assigning responsibilities.
C. Finance textbook illustrations of generally accepted good treasury function practices.
D. Codification of best practices of the treasury function in relevant industries.

Selected Answer: A

Question #: 75
Topic #: 5
When an internal auditor applies due professional care to perform an assurance engagement, which of the following must she consider?
1. Findings of the last audit engagement performed.
2. Probability of significant errors, irregularities, or noncompliance.
3. Extent of work needed to achieve engagement objectives.
4. Cost of the engagement versus the potential benefits.

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

Selected Answer: D

Question #: 75
Topic #: 2
Which of the following elements should an auditor recommend for inclusion in an organization’s code of ethics?
I. Ethics should vary with local customs in the organization’s foreign operations.
II. Whistle-blowing should be discouraged because it can cause distrust among employees and false accusations which waste organizational resources on investigations.
III. Ethical behavior should not be incorporated into performance evaluations because it is too subjective and controversial.

A. I only
B. II only
C. I, II, and III.
D. None of the above.

Selected Answer: C

Question #: 76
Topic #: 3
An internal auditor used a questionnaire during an interview to gather information about the nature of credit sales processing. The questionnaire did not cover some pertinent information offered by the person being interviewed, and the auditor did not document the potential problems for further investigation. The primary deficiency with the above process is that:

A. The auditor failed to consider the importance of the information offered.
B. A questionnaire was used in a situation where a structured interview should have been used.
C. The use of a questionnaire precluded the auditor from documenting other information.
D. The engagement program was incomplete.

Selected Answer: D

Question #: 77
Topic #: 1
Which of the following actions would be considered a violation of the Standards?
I. Drafts of engagement communications were reviewed with the audit client to obtain input. The client’s comments were considered when developing the engagement final communication.
II. An auditor participated as part of a development team to review the control procedures to be incorporated into a major computer application under development.
III. Given limited resources, the chief audit executive performed a risk analysis to determine which functions to audit.

A. II only
B. I and III only
C. I, II, and III.
D. None of the above.

Selected Answer: C

Question #: 77
Topic #: 4
In selecting a team to perform an internal audit of a purchasing operation, which of the following characteristics would not preclude an auditor from being selected?
1. The auditor’s spouse is employed by the clerical section of the purchasing records unit.
2. The auditor had been a purchasing agent five years earlier.
3. The auditor’s family owns a business that regularly sells goods to the organization.
4. The auditor has received a desk calendar as a promotional gift from a vendor.

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

Selected Answer: B

Question #: 78
Topic #: 3
A company produces a product that consists of materials X, Y, and Z. The product is mixed so that:
✑ The quantity of material X used is one-third more than that of material Y.
✑ The quantity of material Y used is one-fourth less than that of material Z.
If the company used 24, 000 units of material Z during a period, what is a reasonable estimate of the amount of material X used?

A. 8, 000
B. 18, 000
C. 24, 000
D. 32, 000

Selected Answer: D

Question #: 78
Topic #: 1
A manufacturer uses a materials requirements planning (MRP) system to track inventory, orders, and raw materials requirements. What condition should an auditor search for in the MRP database if a preliminary assessment indicated that inventory is understated?
I. Item cost set at zero.
II. Negative quantities on hand.
III. Order quantity exceeding requirements.
IV. Inventory lead times exceeding delivery schedule.

A. I and II only
B. I and IV only
C. II and IV only
D. III and IV only

Selected Answer: A

Question #: 79
Topic #: 1
To identify those components of a telecommunications system that present the greatest risk, an internal auditor should first:

A. Review the open systems interconnect network model.
B. Identify the network operating costs.
C. Determine the business purpose of the network.
D. Map the network software and hardware products into their respective layers.

Selected Answer: D

Question #: 80
Topic #: 1
The chief audit executive’s responsibility regarding control processes includes:

A. Assisting senior management and the audit committee in the development of an annual assessment about internal control.
B. Overseeing the establishment of internal control processes.
C. Maintaining the organization’s governance processes.
D. Ensuring that the internal audit activity assesses all control processes annually.

Selected Answer: C

Question #: 81
Topic #: 4
Which of the following actions would have the greatest impact on the effectiveness of the internal audit activity?

A. Appropriate compliance coverage in the annual audit plan.
B. Annual review of the audit charter by management.
C. Appropriate definition of internal audit scope and responsibility in the charter.
D. Assurance of internal audit objectivity and organizational independence by the board.

Selected Answer: D

Question #: 81
Topic #: 4
Which of the following actions would have the greatest impact on the effectiveness of the internal audit activity?

A. Appropriate compliance coverage in the annual audit plan.
B. Annual review of the audit charter by management.
C. Appropriate definition of internal audit scope and responsibility in the charter.
D. Assurance of internal audit objectivity and organizational independence by the board.

Selected Answer: D

Question #: 83
Topic #: 1
Which of the following would be the most useful in developing an annual audit plan?

A. General purpose audit software.
B. Voting software and hardware.
C. Flowcharting and data capture software.
D. Risk assessment software.

Selected Answer: C

Question #: 83
Topic #: 3
During an audit of a major contract, an internal auditor finds that actual hours and dollars billed are consistently at or near budgeted amounts. This condition is a red flag for which of the following procurement fraud schemes?

A. Defective pricing.
B. Cost mischarging.
C. Fictitious vendor.
D. Bid rotation.

Selected Answer: A

Question #: 84
Topic #: 3
Which of the following is characteristic of embezzlement?

A. Favors from a supplier that is attempting to gain advantage when selling its products.
B. Unlawful conversion of assets that are in the possession of an employee.
C. Misrepresentation of material facts in order to mislead others to part with something of value.
D. Stealing of material of value by unknown persons from outside the organization.

Selected Answer: D

Question #: 84
Topic #: 5
Which of the following conditions is the most likely indicator of fraud?

A. Commissions are paid based on verified increases to sales.
B. Departmental reports are consistently issued in an untimely manner.
C. A manager regularly assumes subordinates’ duties.
D. Lower earnings occur during the industry’s down cycle.

Selected Answer: C

Question #: 84
Topic #: 1
Which of the following is not an appropriate control related to sales in a manufacturing company?

A. Customers’ orders are recorded promptly.
B. Goods shipped are matched with valid customer orders.
C. Goods returned are inspected for damage by the sales department and then entered into inventory.
D. Credit department approval is required for credit sales transactions.

Selected Answer: D

Question #: 85
Topic #: 1
Inadequate risk assessment would have the strongest negative impact in which of the following phases of an audit engagement?

A. Determining the scope.
B. Reviewing internal controls.
C. Testing.
D. Evaluating findings.

Selected Answer: D

Question #: 87
Topic #: 6
What is the primary reason a chief audit executive should dedicate time and resources to support continuing professional development of internal audit staff?

A. To ensure that internal audit staff maintain high overall job satisfaction.
B. To ensure that internal audit staff acquire continuing professional education credits timely.
C. To ensure that top risks are mitigated to an acceptable level.
D. To ensure that internal audit staff have the competency to address high-priority risks.

Selected Answer: A

Question #: 87
Topic #: 6
What is the primary reason a chief audit executive should dedicate time and resources to support continuing professional development of internal audit staff?

A. To ensure that internal audit staff maintain high overall job satisfaction.
B. To ensure that internal audit staff acquire continuing professional education credits timely.
C. To ensure that top risks are mitigated to an acceptable level.
D. To ensure that internal audit staff have the competency to address high-priority risks.

Selected Answer: A

Question #: 87
Topic #: 4
In order to be organizationally independent, the chief audit executive should report administratively to the [List A] and functionally to the [List B].
[List A] [List B]

A. Audit committee Board of directors
B. Chief executive officer Board of directors
C. Chief executive officer Chief financial officer
D. Audit committee

Selected Answer: C

Question #: 87
Topic #: 1
In developing an appropriate work program for an audit engagement, the most important factor for an audit supervisor to consider is the:

A. Availability of records and data.
B. Potential impact of risks.
C. Capabilities of audit personnel.
D. Time required to complete the engagement.

Selected Answer: B

Question #: 88
Topic #: 5
Which of the following would provide the best evidence of errors in the quantities of items received from suppliers?

A. Suppliers’ reports of over shipments.
B. Warehouse receiving logs.
C. Purchase requisitions and purchase orders.
D. Observation and inspection of inventory.

Selected Answer: A

Question #: 89
Topic #: 3
During a routine audit of a customer service hotline, an internal auditor noticed that an unusually high number of customer complaints pertained to payments not being applied to the customers’ accounts. Which of the following would most likely be the reason for the high volume of complaints?

A. An ineffective customer service department.
B. Poor controls in the invoice approval processes.
C. Check tampering by an employee.
D. Submission of fraudulent expense reports.

Selected Answer: D

Question #: 89
Topic #: 2
According to the International Professional Practices Framework, risk is:
I. Defined as the negative effect of events that are expected to occur.
II. Measured in terms of consequences.
III. Measured in terms of likelihood.

A. I only
B. I and II only
C. II and III only
D. I, II, and III.

Selected Answer: A

Question #: 89
Topic #: 1
In order to provide the most useful information for an organization’s risk management decisions, which of the following should be assessed?

A. Risk levels for future events based on the degree of uncertainty of those events and their cost of mitigation.
B. Inherent and control risks and their impact on the extent of financial misstatements.
C. Risk levels of current and future events, their effect on the achievement of the organization’s objectives, and their underlying causes.
D. Risk levels of current and future events, their impact on the organization’s mission, and the potential for the elimination of existing risk factors.

Selected Answer: D

Question #: 90
Topic #: 2
When planning the work program for an assurance engagement, an internal auditor should first review the department’s business objectives and then:

A. Identify risks.
B. Review controls.
C. Determine scope.
D. Evaluate vulnerabilities.

Selected Answer: B

Question #: 90
Topic #: 1
Which of the following represents the most effective governance structure?
I.

Operating –

Executive –

Internal –

Management –

Management –

Auditing –

Responsibility for risk –

Oversight role –

Advisory role –
II.

Oversight role –

Responsibility for risk –

Advisory role –
III.

Responsibility for risk –

Advisory role –

Oversight role –
IV.

Oversight role –

Advisory role –

Responsibility for risk –

A. I Only
B. II
C. III
D. IV

Selected Answer: D

Question #: 91
Topic #: 5
An internal auditor is conducting an engagement in the accounts payable department, which includes expressing an opinion at the micro level. According to IIA guidance, which of the following statements is true regarding micro-level opinions?
1. They are most effective when using a combination of current and prior engagement findings to draw conclusions.
2. They typically are based on defined procedures such as those found in an accounts payable reconciliation process.
3. They are discrete and not normally shared with senior management or the board.
4. They can rely on evidence taken from the work of other assurance activities across the organization.

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

Selected Answer: D

Question #: 91
Topic #: 5
An internal auditor is conducting an engagement in the accounts payable department, which includes expressing an opinion at the micro level. According to IIA guidance, which of the following statements is true regarding micro-level opinions?
1. They are most effective when using a combination of current and prior engagement findings to draw conclusions.
2. They typically are based on defined procedures such as those found in an accounts payable reconciliation process.
3. They are discrete and not normally shared with senior management or the board.
4. They can rely on evidence taken from the work of other assurance activities across the organization.

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

Selected Answer: D

Question #: 92
Topic #: 2
Which of the following actions by a chief audit executive is most likely to prevent exaggerated sales reports by division management?
I. Hire a new internal auditor who has fraud investigation credentials.
II. Assist the controller in developing and monitoring a series of business process indicators which are historically correlated with, but independent of, sales.
III. Announce a series of internal audit engagements focusing on compliance with corporate sales-reporting policies.
IV. Ask the president and the board to issue a statement of corporate policy stressing the importance of accurate management reporting and the negative consequences of intentional misreporting.

A. I and II only
B. II and III only
C. III and IV only
D. I, II, III, and IV.

Selected Answer: B

Question #: 92
Topic #: 3
An engagement manager is reviewing the results of sampling work performed by staff internal auditors. Which interim report statement should immediately give the engagement manager cause for concern about the nature and quality of the sampling procedure?

A. The acceptable risk of assessing control risk too low is 10%, the tolerable deviation rate is 5%, the expected population deviation rate is 1%, sample size is 80 out of a large population.
B. The acceptable risk of assessing control risk too low is 5%, the tolerable deviation rate is 5%, the expected population deviation rate is 5%, the sample size is 1580.
C. The acceptable risk of assessing control risk too low is 5%, the tolerable deviation rate is 5%, the expected population deviation rate is 1%, the confidence expressed is 95%.
D. The acceptable risk of assessing control risk too low is 10%, the tolerable deviation rate is 5%, the true, but unknown population rate is less than 5%, the

Selected Answer: D

Question #: 92
Topic #: 1
Which of the following is a role of the board of directors in the governance process?

A. Conduct periodic assessments of the organization’s governance systems.
B. Obtain assurance concerning the effectiveness of the organization’s governance systems.
C. Implement an effective system of internal controls to support the organization’s governance systems.
D. Review and approve operational goals and objectives.

Selected Answer: C

Question #: 93
Topic #: 1
Which is the least effective form of risk management?

A. Systems-based preventive control.
B. People-based preventive control.
C. Systems-based detective control.
D. People-based detective control.

Selected Answer: A

Question #: 93
Topic #: 2
In assessing the independence of the internal audit activity, a member of a peer review team should consider all of the following factors except:

A. Access to and frequency of communications with the board of directors or its audit committee.
B. The criteria of education and experience considered necessary when filling vacant positions on the audit staff.
C. The degree to which auditors assume operating responsibilities.
D. The scope and depth of engagement objectives for the audit engagements included in the review.

Selected Answer: B

Question #: 93
Topic #: 3
Which of the following is considered a common red flag indicator in helping to uncover fraud?

A. Improper segregation of duties.
B. Repeated poor performance.
C. Termination from previous employer.
D. Experiencing financial difficulty.

Selected Answer: A

Question #: 94
Topic #: 4
Which of the following examples best describes how an internal auditor should behave while listening to an engagement client talk about human resource process problems?

A. The auditor should gather their thoughts in order to have a response immediately ready for the client.
B. The auditor should integrate the information the client provides with the information that is already known.
C. The auditor should make an internal note of the clients gestures, demeanor, and body language, rather than paying close attention to the content of the discussion.
D. The auditor should mentally plan the next steps of the audit engagement.

Selected Answer: A

Question #: 95
Topic #: 1
In an assurance engagement of treasury operations, an internal auditor is required to consider all of the following issues except:

A. The audit committee has requested assurance on the treasury department’s compliance with a new policy on the use of financial instruments.
B. Treasury management has not instituted any risk management policies.
C. Due to the recent sale of a division, the amount of cash and marketable securities managed by the treasury department has increased by 350 percent.
D. The external auditors have indicated some difficulties in obtaining account confirmations.

Selected Answer: D

Question #: 95
Topic #: 3
According to the IIA Code of Ethics, the deliberate omission of relevant information from an audit report would violate which principle?

A. Honesty.
B. Competency.
C. Responsibility.
D. Integrity.

Selected Answer: B

Question #: 95
Topic #: 5
An internal audit charter describes the mission and scope of the internal audit activity (IAA), responsibilities of the IAA, accountability of the chief audit executive, independence of the IAA, and standards followed by the IAA. Which of the following also should be included in the charter?

A. The purpose of the IAA.
B. The IAA’s right to have unrestricted access to functions, records, personnel, and physical property.
C. A detailed audit plan or program for the year.
D. The job specifications and descriptions of the internal audit staff.

Selected Answer: A

Question #: 96
Topic #: 5
Which the following activities should be performed by the internal audit activity to facilitate an effective relationship with the audit committee?
1. Periodically report about the accounting standards followed by the organization.
2. Provide assurance to the audit committee that its charter, activities, and processes are appropriate.
3. Ensure that the role and activities of the internal audit activity are clearly understood and responsive to the needs of the audit committee.
4. Maintain open and effective communications with the audit committee.

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

Selected Answer: C

Question #: 97
Topic #: 3
The chief audit executive is revising policies relating to independence and objectivity of the internal audit activity. Which of the following would be a part of the revised policies document?

A. Any auditor that received high-value gifts from an audit client must report it to their supervisor.
B. Any auditor that received gifts of low-value promotional items from an audit client must report it to their supervisor.
C. An auditor does not need to complete an annual conflict of interest form unless the auditor’s independence status has changed.
D. An auditor may provide consulting services relating to operations for which they had previous responsibilities.

Selected Answer: D

Question #: 99
Topic #: 4
Internal control processes in an organization require that all investments exceeding $20, 000 receive authorization from both the president and treasurer. After conducting a sample of these transactions, an auditor determined that 10 of the 500 investments in the sample had not included both required authorizations. The sample has a five percent acceptable error rate. Based on this sample, which of the following actions should the auditor take?

A. Confirm all of the investments with the organization’s internal finance department.
B. Contact the organization’s investment broker and confirm all investments.
C. Complete a comprehensive review of the organization’s investment activity and compare variations over prior years.
D. Determine that no further testing of investment authorizations is required.

Selected Answer: C

Question #: 100
Topic #: 3
Which of the following is not a typical objective of any training plan developed for internal audit activity staff?

A. Consistency.
B. Economy.
C. Quality.
D. Relevance.

Selected Answer: D

Question #: 100
Topic #: 1
Overall audit efficiency is enhanced between the internal and external audit functions when:

A. Internal audit coverage is reduced to avoid potential conflicts of interest.
B. Audits of the same department are conducted at different times.
C. The internal audit department reviews functions or departments prior to the external audit.
D. External audit scope is reduced based on the internal audit department’s activities.

Selected Answer: B

Question #: 100
Topic #: 5
Which of the following actions should an internal auditor take to exercise due professional care?
1. Consider the probability of significant noncompliance in each audit engagement.
2. Weigh the cost of assurance against the benefits.
3. Perform assurance procedures with sufficient care to ensure that all risks are identified.

A. 1 and 2 only
B. 1 and 3 only
C. 2 and 3 only
D. 1, 2, and 3

Selected Answer: A

Question #: 100
Topic #: 4
During an interview with a data-entry clerk in the human resources department, an internal auditor recognizes a potentially significant weakness with a database system used to track employee performance ratings. Which of the following actions should the auditor take after discovering the weakness?

A. Schedule a series of follow-up interviews with the data-entry clerk.
B. Avoid either directly or indirectly confronting the data-entry clerk about the system weakness.
C. Question the data-entry clerk indirectly to help obtain more factual information about the weakness.
D. Immediately document the weakness and write a report to the data-entry clerk’s superior.

Selected Answer: C

Question #: 103
Topic #: 6
IT management requires all employees in the IT department to attend annual training on the department’s mission, values, and key performance measures. This activity is designed to prevent which of the following conditions?

A. Knowledge/skills gap.
B. Monitoring gap.
C. Accountability/reward failure.
D. Communication failure.

Selected Answer: A

Question #: 103
Topic #: 6
IT management requires all employees in the IT department to attend annual training on the department’s mission, values, and key performance measures. This activity is designed to prevent which of the following conditions?

A. Knowledge/skills gap.
B. Monitoring gap.
C. Accountability/reward failure.
D. Communication failure.

Selected Answer: C