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NEW QUESTION 60
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.
-
- A. 2 and 4 only.
- B. 1 and 3 only.
- C. 2 and 3 only.
- D. 3 and 4 only.
Answer: C
NEW QUESTION 61
According to IIA guidance, which of the following statements is false regarding a review of the controls in place to prevent fraud?
- A. The review should focus on the efficiency of the controls in place to prevent fraud.
- B. The scope of the review does not need to include all operating areas of the organization.
- C. The cost of the control should be compared to the benefit of mitigating the related risk.
- D. The review should assess whether the internal controls can be circumvented.
Answer: A
NEW QUESTION 62
According to the Standards, which of the following would least likely be considered a red flag when evaluating the risk for fraud?
- A. Health benefits are detected to be claimed for a deceased employee.
- B. An employee did not approve an internal report detailing expenses for the month.
- C. It is alleged that an employee is receiving vendor kickbacks.
- D. Cash receipts appear to be lower than expected from an employee's cash drawer.
Answer: B
NEW QUESTION 63
During which of the following systems development stages would it be most useful for an internal auditor to be involved?
- A. Design and implementation.
- B. Coding and testing.
- C. User acceptance and post-implementation.
- D. Testing and user acceptance.
Answer: A
Explanation:
Section: Volume B
NEW QUESTION 64
The chief audit executive (CAE) notes during review of the final report of an assurance engagement that management has decided to accept the risks of two significant exposures identified by the audit. Which of the following actions by the CAE would be least prudent in these circumstances?
- A. Implement follow-up procedures to monitor the potential impact of those risks.
- B. Review the working papers and conclusions as to the perceived residual risk.
- C. Meet with the auditor-in-charge to review the conclusions.
- D. Meet with senior management to consider their reasoning for the decision.
Answer: A
Explanation:
Section: Volume D
NEW QUESTION 65
An internal auditor would most likely use attributes sampling when testing which of the following?
- A. Year-end inventory value.
- B. Correct coding of accounts payable disbursement vouchers.
- C. Accounts receivable balances.
- D. Fixed asset book value.
Answer: B
Explanation:
Section: Volume A
NEW QUESTION 66
After partially completing an internal control review of the accounts payable department, an auditor suspects that some type of fraud has occurred. To ascertain whether the fraud is present, the best sampling approach would be to use:
- A. Probability-proportional-to-size sampling to select a sample of vouchers processed by the department during the past year.
- B. Discovery sampling to select a sample of vouchers processed by the department during the past year.
- C. Judgmental sampling to select a sample of vouchers processed by clerks who were identified by the department manager as acting suspiciously.
- D. Simple random sampling to select a sample of vouchers processed by the department during the past year.
Answer: B
NEW QUESTION 67
In which of the following situations would an internal control questionnaire best suit the internal auditor's purpose?
- A. The auditor wants to obtain information on whether adherence to approval matrices is actually taking place in different maintenance units.
- B. The auditor wants to assess whether different subsidiaries apply centrally established procurement rules in the same manner
- C. The auditor wants to gain assurance that inventory counts are conducted in accordance with established procedures.
- D. The auditor wants to receive mid-level management insight on how to improve hiring practices
Answer: B
NEW QUESTION 68
Which of the following documents should the chief audit executive review and approve?
1. Workpaper retention policy.
2. Audit committee meeting minutes.
3. Internal audit handbook.
4. Quarterly financial statements.
- A. 1 and 3 only
- B. 2 and 4 only
- C. 1, 3, and 4 only
- D. 1 and 2 only
Answer: A
Explanation:
Section: Volume D
NEW QUESTION 69
Which of the following is a justifiable reason for omitting advance client notice when planning an audit engagement?
- A. The engagement includes audit assurance procedures such as sensitive or restricted asset verifications.
- B. The audit engagement has already been communicated and approved through the annual audit plan.
- C. Advance notice may result in management making corrections to reduce the number of potential deficiencies.
- D. Previous management action plans addressing prior internal audit recommendations remain incomplete.
Answer: A
NEW QUESTION 70
An auditor is using an internal control questionnaire as part of a preliminary survey. Which of the following is the best reason for the auditor to interview management regarding the questionnaire responses?
- A. Interviews provide the opportunity to insert questions to probe promising areas.
- B. Interviews are the most efficient way to upgrade the information to the level of objective evidence.
- C. Interviewing is the only audit procedure which does not require confirmation of the information that is obtained.
- D. Interviewing is the least costly audit technique when a large amount of information is involved.
Answer: A
NEW QUESTION 71
During the planning phase of an audit of the treasury function, an internal auditor conducted a risk assessment of the function in order to:
- A. Report any high-risk exposures of the treasury function to management and the board.
- B. Determine whether appropriate resources are present to carry out the treasury function.
- C. Identify areas of the treasury function that should be considered for potential engagement objectives.
- D. Comply with the internal audit charter and applicable regulatory requirements.
Answer: C
NEW QUESTION 72
According to IIA guidance, which of the following is least likely to be a key financial control in an organization's accounts payable process?
- A. Require the approval of additions and changes to the vendor master listing, where the inherent risk of false vendors is high.
- B. Compare employee addresses to vendor addresses to identify potential employee fraud.
- C. Monitor customer quality complaints compared to the prior period to identify vendor issues.
- D. Monitor amounts paid each period and compare them to the budget to identify potential issues.
Answer: C
NEW QUESTION 73
Which of the following recommendations made by the internal audit activity (IAA) is most likely to help prevent fraud?
- A. A vacation policy compliance review found that employees frequently leave on vacation before their leave applications are signed by their manager. The IAA recommends that the manager attend to the leave applications in a more timely fashion.
- B. A review of internal service-level agreement compliance in financial services found that requests for information frequently are fulfilled up to two weeks late. The IAA recommends that the financial services unit be eliminated for its ineffectiveness.
- C. A review of customer service-level agreements found that orders to several customers are frequently delivered late. The IAA recommends that the organization extend the expected delivery time advertised on its website.
- D. A review of password policy compliance found that employees frequently use the same password more than once during a year. The IAA recommends that the access control software reject any password used more than once during a 12-month period.
Answer: D
NEW QUESTION 74
Which of the following would most likely include recommendations for process improvements?
* Due diligence engagement.
* Forensic investigation.
* Internal audit engagement.
* Consulting engagement.
- A. 2, 3, and 4 only
- B. 1, 3, and 4 only
- C. 1, 2, and 4 only
- D. 1, 2, and 3 only
Answer: A
NEW QUESTION 75
Which of the following statements is true?
- A. The internal audit activity's plan of engagments must be based on a formal quantitative risk assessment.
- B. A risk assessment on which to base the internal audit activity's long-range plan must be undertaken at least once every three years.
- C. The chief audit executive should consider changes to the long-range audit plan based on the requests of business unit managers.
- D. Consulting engagements provide the internal audit activity with flexibility to add value and do not need to be included in the long-range audit plan.
Answer: C
NEW QUESTION 76
When creating the internal audit plan, the chief audit executive should prioritize engagements based primarily on which of the following?
- A. Requests from senior management and the board.
- B. The longest interval since the last examination of each audit universe item.
- C. The last available risk assessment.
- D. The auditable areas required by regulatory agencies.
Answer: C
Explanation:
Section: Volume E
NEW QUESTION 77
Given the scarcity of internal audit resources, a chief audit executive (CAE) decided not to schedule a follow-up of audit recommendations when developing engagement work schedules. Does the CAE's decision violate the Standards?
- A. No, because the Standards do not specify whether follow-up is needed.
- B. Yes, because the Standards require the auditors to determine whether the client has appropriately implemented all of the auditor's recommendations.
- C. Yes, because scarcity of resources is not a sufficient reason to omit follow-up action.
- D. No, because when there is evidence of sufficient motivation by the client, there is no need for follow-up action.
Answer: C
NEW QUESTION 78
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