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NEW QUESTION # 171
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. Purchase requisitions and purchase orders.
- C. Warehouse receiving logs.
- D. Observation and inspection of inventory.
Answer: C
NEW QUESTION # 172
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. A detailed audit plan or program for the year.
- C. The IAA's right to have unrestricted access to functions, records, personnel, and physical property.
- D. The job specifications and descriptions of the internal audit staff.
Answer: C
NEW QUESTION # 173
Which of the following is most likely to be considered a control weakness?
- A. Buyers promptly update the official vendor listing as new supplier sources become known.
- B. Vendor invoice payment requests are accompanied by a purchase order and receiving report.
- C. Purchase orders are typed by the purchasing department using prenumbered forms.
- D. Department managers initiate purchase requests that must be approved by the plant superintendent.
Answer: A
NEW QUESTION # 174
The audit committee is concerned that the small size of the internal audit activity (IAA) makes it impractical to achieve full conformance with the Standards. To address this concern, which of the following actions is most appropriate for the CAE to take?
- A. The CAE should seek sufficient funding to increase audit resources to meet the minimum requirements of the Standards.
- B. The CAE should agree with the audit committee and implement only those standards appropriate to the size of the IAA.
- C. The CAE should request the audit committee to review the Standards to identify specifically which are creating the greatest concern.
- D. The CAE should explain that conformance with the Standards is essential and not dependent upon the size of the IAA.
Answer: D
NEW QUESTION # 175
A large trucking organization wants to reduce traffic accidents by improving its system of internal controls.
Which of the following controls is correctly classified?
1. Review of speeding violations to identify repetitive locations and drivers is an example of a preventive control.
2. Defensive driver training is an example of a directive control.
3. The installation of tracking devices in delivery vehicles is an example of a corrective control.
4. Providing a vehicle driver handbook is an example of a detective control.
- A. 1 and 2.
- B. 3 and 4.
- C. 1 and 4.
- D. 2 and 3.
Answer: A
NEW QUESTION # 176
Which of the following control methods is effective in reducing the risk of purchasing-scheme fraud?
1. Periodically reviewing the vendor list for unusual vendors and addresses.
2. Segregating duties for amount purchasing, receiving, shipping, and accounting.
3. Validating sequential integrity of purchase orders.
4. Verifying the validity of invoices with post office box addresses.
- A. 1, 2, 3, and 4
- B. 3 and 4 only
- C. 1, 2, and 4 only
- D. 1 and 2 only
Answer: B
NEW QUESTION # 177
The internal audit activity is planning a procurement audit and needs to obtain a thorough understanding of the subcontracting process, which can involve multiple individuals in multiple countries.
Which of the following internal audit tools would be most effective to document the process and the key controls?
- A. Internal control checklist.
- B. Procurement employee survey.
- C. Segregation of duties matrix.
- D. Cross-functional flow chart.
Answer: D
NEW QUESTION # 178
The manager for an organization's accounts payable department resigned her post in that capacity. Three months later, she was recruited to the internal audit activity and has been working with the audit team for the last eight months. Which of the following assignments would the newly hired internal auditor be able to execute without any impairments to independence or objectivity?
- A. A review of the employees' sports club finances, which are overseen by the chief audit executive.
- B. An operations audit of the accounts payable department.
- C. An assurance review for a sales program on which she previously provided consultation.
- D. A consulting engagement related to a new accounts payable optimization initiative.
Answer: A
NEW QUESTION # 179
An internal auditor completed an audit of a bank's loan department and found all significant risks to be managed adequately through effective internal controls. Which of the following would be an appropriate conclusion to report to management?
- A. The inherent risk is lower than or equal to the risk tolerance.
- B. The residual risk is lower than or equal to the risk appetite.
- C. The inherent risk is higher than or equal to the risk tolerance.
- D. The residual risk is higher than or equal to the risk appetite.
Answer: B
NEW QUESTION # 180
Which two of the following are preventive controls in a check disbursement process?
1. Daily reconciliation of the bank account used for check disbursements and prompt follow-up of un-reconciled items.
2. Segregation of the following duties: establishing new vendors, approving checks, and reconciling the bank account.
3. An activity report detailing who accesses the check disbursement system and the nature of any action taken in the system.
4. Evidence of strong access controls ensuring that authorized individuals have access only to the functions related to their responsibilities.
- A. 1 and 3.
- B. 1 and 4.
- C. 2 and 3.
- D. 2 and 4.
Answer: D
NEW QUESTION # 181
According to the Standards, for how long should internal auditors who have previously performed or had management responsibility for an operation wait to become involved in future internal audit activity with that same operation?
- A. One year.
- B. Two years.
- C. Three months.
- D. Six months.
Answer: A
NEW QUESTION # 182
An organization's chief audit executive (CAE) determines that the internal audit staff does not have the requisite skills to conduct an audit of the financial derivatives area. Which of the following would be the best course of action for the CAE to follow?
- A. Employ the skills of a financial derivatives expert to consult on the project, and supplement the consulting with a local seminar on financial derivatives.
- B. Determine the requisite knowledge needed, and obtain the proper training for auditors, even if the training will significantly push back the project's timeframe as outlined by the audit committee.
- C. Outsource the audit engagement to a qualified external auditing firm without burdening the audit committee with the decision.
- D. Notify the audit committee of the problem, and assign the most competent auditors on staff to perform the audit engagement.
Answer: A
NEW QUESTION # 183
A chief audit executive (CAE) reports functionally to the CEO and administratively to the chief financial officer, both of whom serve on the company's board of directors. According to IIA guidance, which of the following would offer the greatest protection for the independence of the internal audit activity?
- A. Move the CAE's functional reporting to the audit committee.
- B. Appoint the CAE as a member of the board.
- C. Obtain full board approval of the internal audit activity's annual audit plan.
- D. Move the CAE's functional reporting to an executive who is not on the board.
Answer: A
NEW QUESTION # 184
What is the additional advantage of facilitated workshops, in comparison with structured interviews, used when testing the effectiveness of entity-level controls?
- A. The testimonial evidence obtained during facilitated workshops is generally considered more reliable.
- B. During facilitated workshops, people more openly say things to internal auditors than during private interviews.
- C. Internal auditors do not need other sources of information, as the data gathered during facilitated workshops is sufficient.
- D. Facilitated workshops create a synergy of discussion that can bring multiple perspectives to the same issue.
Answer: D
NEW QUESTION # 185
Which of the following documents is most appropriate in promoting the objectivity of the internal audit activity?
- A. Personal responsibility policy.
- B. Risk management framework.
- C. Acceptance of gifts policy.
- D. Usage of IT system policy.
Answer: C
NEW QUESTION # 186
A snow removal company is conducting a scenario planning exercise where participating employees consider the potential impacts of a significant reduction in annua snowfall for the coming winter. Which of the following best describes this type of risk?
- A. Residual.
- B. Accepted.
- C. Inherent.
- D. Net.
Answer: C
NEW QUESTION # 187
Which of the following is the most effective strategy to manage the risk of foreign exchange losses due to sales to foreign customers?
- A. Insist that customers only pay in a stable currency.
- B. Maintain a large foreign currency balance.
- C. Hire a risk consultant.
- D. Implement a hedging strategy.
Answer: D
NEW QUESTION # 188
Internal auditors must exercise due professional care by considering which of the following?
1. Cost of assurance in relation to potential benefits.
2. Adequacy and effectiveness of governance, risk management, and control processes.
3. Management's competency level in the area being evaluated.
4. Probability of significant errors, fraud, or noncompliance.
- A. 2, 3, and 4 only
- B. 1, 2, and 4 only
- C. 1, 2, and 3 only
- D. 1 and 2 only
Answer: B
NEW QUESTION # 189
An organization has implemented a new automated payroll system that contains a table of pay rates that are matched to employee job classifications. Which control should an internal auditor suggest in order to ensure that the table is updated correctly, and is used only for valid pay changes?
- A. Ensure that adequate edit and reasonableness checks are built into the automated system.
- B. Require a supervisor in the department, who has the ability to change the table, to compare the changes to a signed management authorization.
- C. Restrict data-table access from management and line supervisors who have the authority to determine pay rates.
- D. Require a manager, who is independent of the system and who cannot change the table, to authorize and sign-off on any employee pay changes.
Answer: D
NEW QUESTION # 190
According to IIA guidance, which of the following practices by the chief audit executive (CAE) best enhances the organizational independence of the internal audit activity?
- A. CAE meets privately with The board at least annually.
- B. CAE reports to the board regarding audit staff performance evaluation and compensation.
- C. CAE meets privately with The CEO at least annually.
- D. CAE reviews and approves the annual audit plan.
Answer: B
NEW QUESTION # 191
Non-statistical sampling does not require which of the following?
- A. A smaller sample size than if selected using statistical sampling.
- B. Projecting the results to the population.
- C. The sample to be selected haphazardly.
- D. The sample to be representative of the population.
Answer: A
NEW QUESTION # 192
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