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Essentials of Internal Auditing

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Question # 1

Which of the following is an example of a directive control?

Options:

A.  

Segregation of duties.

B.  

Exception reports.

C.  

Training programs.

D.  

Supervisory review.

Discussion 0
Question # 2

After being assigned to an audit of the accounts payable process, an internal auditor privately notifies the chief audit executive that she is a finalist for an open manager position within the accounts payable department. Which of the following is the IIA Code of Ethics principle that the auditor upheld?

Options:

A.  

Independence.

B.  

Confidentiality.

C.  

Objectivity.

D.  

Competency

Discussion 0
Question # 3

The internal audit activity is asked to review the effectiveness of controls around the disposal of chemical waste. However, the internal auditors on staff lack the necessary skills to conduct this review. Which of the following would be the most appropriate approach?

Options:

A.  

An internal auditor who recently attended a three-day workshop on chemical waste disposal, and therefore has the most knowledge on the topic, should lead the engagement.

B.  

A team of available internal auditors should be assembled and should consult with an external nonaudit expert on chemical waste disposal to plan and conduct the engagement.

C.  

A team of the most knowledgeable auditors could be assembled and use the engagement work program from the previous year to gather additional insight regarding recommended audit procedures.

D.  

A nonaudit employee from the chemical disposal area may share his expertise with the audit team, provided the internal audit manager conducts a detailed review of all engagement work performed.

Discussion 0
Question # 4

Which of the following actions should the internal audit activity take during an audit engagement when examining the effectiveness of risk management processes?

Options:

A.  

Evaluate how the organization manages fraud risk.

B.  

Establish procedures for improving risk management processes.

C.  

Ensure risk responses are aligned with industry standards.

D.  

Verify that organizational objectives are aligned with each department’s objectives.

Discussion 0
Question # 5

Which of the following statements best demonstrates application of due professional care during an assurance engagement?

Options:

A.  

The engagement detected irregularities and noncompliance instances.

B.  

The engagement supervisor had no significant comments in the supervisory review.

C.  

The audit procedures were systematically planned, executed, and documented.

D.  

The engagement objectives were designed to assist the engagement client.

Discussion 0
Question # 6

Which of the following specifications in an internal audit charter is the most important factor in the internal audit activity’s independence?

Options:

A.  

Description of internal audit activity's responsibilities

B.  

Definition of internal auditing

C.  

Statement of internal audit activity's authority

D.  

Description of internal audit activity's reporting structure

Discussion 0
Question # 7

A business unit manager was impressed by the competence of the internal auditor who was conducting an assurance engagement in his area and the manager made the auditor an attractive job offer to begin after the audit was completed The auditor later told her auditor in charge that she was considering the offer. Which of the following IIA Code of Ethics principles was most likely violated?

Options:

A.  

Integrity

B.  

Confidentiality

C.  

Objectivity

D.  

No violation was committed

Discussion 0
Question # 8

The internal audit activity is responsible for which of the following actions related to an organization’s internal controls?

Options:

A.  

Mitigating risks affecting achievement of organizational objectives.

B.  

Enabling opportunities affecting achievement of organizational objectives.

C.  

Analyzing and advising regarding costs versus benefits of control activities,

D.  

Attesting to fairness of financial statements.

Discussion 0
Question # 9

An internal auditor was assigned to work in the procurement department for six months to gam m-depth knowledge about the procurement process. Which of the following personnel development practices was applied in this situation?

Options:

A.  

Cosourcing

B.  

Inbound rotation

C.  

Guest auditor

D.  

Outbound rotation

Discussion 0
Question # 10

According to IIA guidance, which of the following statements is true regarding internal auditors' knowledge, skills and other competencies?

Options:

A.  

The chief audit executive (CAE) must obtain competent advice and assistance if the internal audit activity lacks the knowledge, skills, or other competencies needed to complete the audit engagement

B.  

Internal auditors must have sufficient knowledge to evaluate the risk of fraud and the manner in which it is managed by the organization and should have the expertise of a fraud investigator

C.  

Internal auditors need to have basic knowledge of key IT risks and controls and available technology-based audit techniques in order to perform their assigned work

D.  

The CAE must refuse a consulting engagement if the internal audit activity lacks the knowledge, skills, or other competencies needed to perform all or part of the engagement

Discussion 0
Question # 11

After the final audit report was issued, the engagement supervisor received an expensive gift from management recognizing her assistance in improving the business, if the gift is accepted, which of the following would be true?

Options:

A.  

The engagement supervisor violated The IIA's Code of Ethics principle of integrity.

B.  

The engagement supervisor violated The IIA's Code of Ethics principle of objectivity.

C.  

The engagement supervisor violated The IIA’s Code of Ethics principle of confidentiality.

D.  

The engagement supervisor did not violate any principles of The IIA’s Code of Ethics.

Discussion 0
Question # 12

With regard to organizational governance assurance, which of the following is an appropriate role for the internal audit activity'?

Options:

A.  

Assess compliance with the organization's code of conduct

B.  

Oversee the governance and risk management processes

C.  

Initiate new organizational control processes

D.  

Provide advice on organizational governance activities

Discussion 0
Question # 13

Which of the following is the best example of an ongoing independent monitoring activity?

Options:

A.  

Management quality assurance activities

B.  

Internal audit fraud prevention and detection activities

C.  

Management and supervisory activities

D.  

External audit quality assurance activities

Discussion 0
Question # 14

According to IIA guidance, which of the following is true of the internal audit activity’s quality assurance and improvement program?

1 Monitoring the internal audit activity’s performance must be ongoing

2 All aspects of the internal audit activity should be evaluated

3 The requirement for external assessments can be satisfied through self-assessments that are validated by an independent external party

4 The review of assurance services should be the primary focus

Options:

A.  

1 and 2 only

B.  

2 and 3 only

C.  

1, 2 and 3

D.  

1 3 and 4

Discussion 0
Question # 15

Which of the following statements is true regarding management's use of judgement to design, implement, and conduct internal control?

Options:

A.  

The use of judgment enhances management's ability to make better decisions about internal control, but cannot guarantee perfect outcomes.

B.  

Introducing judgment generally diminishes management's ability to make good decisions about internal control.

C.  

It is inappropriate for management to exercise judgement in areas such as specifying and using suitable accounting principles.

D.  

It is inappropriate for management to exercise judgement in assessing whether components are present, functioning, and operating together

Discussion 0
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