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Q301. Which of the following would be a violation of the objectivity of a certified internal auditor?
1.
Accepting a motivational book from a major vendor.
2.
Attending a professional sporting event as the guest of a corporate supplier.
3.
Performing an internal audit engagement for a division 18 months after having controllership responsibility for that division.
4.
Designing and implementing a corporate-wide utilities cost containment program.
A. 1 and 3only
B. 2 and 3only
C. 2 and 4only
D. 1,3,and 4only
Answer: C
Q302. The results of an internal control questionnaire revealed that all investment activity exceeding $10,
000 must be approved by the assistant treasurer. A sample of these transactions with a five-
percent acceptable error rate found that 98 of the 100 items tested included the assistant
treasurer's approval. Based on this data, the auditor should:
A. Confirm all investment activity with the firm's broker since errors in approval had occurred.
B. Decide not to perform further testing of investment authorizations.
C. Contact the corporate finance department to verify all of the investments held.
D. Perform an analytical review of investment transactions in comparison with prior years to
identify significant fluctuations.
Answer: B
Q303. Risk assessments can vary in format, but generally include.
I. A description of identified risks.
II. Tests of audit controls.
III. A system of rating risks.
IV.
Sample size identification.
A.
I and IIonly
B.
I and IIIonly
C.
I,III,and IVonly
D.
II,III,and IVonly
Answer: B
Q304. Which of the following statements about risk assessment is true?
A. Risk assessment focuses on the quantitative evaluation of exposures.
B. Risk assessment evaluates risk both on an inherent and residual basis.
C. Risk assessment determines the organization's tolerance for exposure.
D. Risk assessment is the amount of inherent risk in a separately identifiable business entity.
Answer: B
Q305. A receiving department receives copies of purchase orders for use in identifying and recording inventory receipts.
The purchase orders list the name of the vendor and the quantities of the materials ordered.
A possible error that this system could allow is:
A. Payment to unauthorized vendors.
B. Payment for unauthorized purchases.
C. Overpayment for partial deliveries.
D. Delay in recording purchases.
Answer: C
Q306. During an account receivables audit, an internal auditor found a significant number of input errors resulting in a $500, 000 balance understatement.
Which of the following is the most important question the internal auditor should ask to develop an appropriate recommendation for this finding?
A. Who?
B. How?
C. Why?
D. When?
Answer: C
Q307. Which of the following results from computer assisted audit techniques provides the most significant indication that additional audit work is needed?
A. Several exact matches were found when vendor and employee addresses were compared.
B. The sum of credit entries on the bank statement did not equal the sum of collections for the same period.
C. Sorting the check register file by vendor name identified missing sequences of check numbers.
D. Matching the accounts payable transaction file with the purchase order request file resulted in many differences between the person requesting the purchase order and the person authorizing payment.
Answer: A
Q308. While attending a conference, an internal auditor won an all-expense paid trip sponsored by a vendor of the internal auditor's organization.
Which of the following actions are most appropriate for the auditor to take?
A. Consult with an immediate supervisor and notify the organization's audit committee.
B. Consult with an immediate supervisor and review the organization's ethics policy.
C. Give the prize to a friend or family member and notitfy the organization's audit committee.
D. Give the prize to a friend or family member and review the organization's ethics policy.
Answer: B
Q309. 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.
Answer: A
Q310. In a well-developed management environment, the internal audit activity would.
A. Report the results of audit engagements to line management as well as to senior management.
B. Conduct regularly scheduled audits of existing systems and initial audits of new computer systems after they have begun operating.
C. Interface primarily with senior management,minimizing interactions with line managers who are the subjects of internal audit work.
D. Focus on the maintenance of accounting controls (such as segregation of the duties of authorization,recording,and custody) and report results to the audit committee.
Answer: A
Q311. 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.
Answer: D
Q312. Which of the following internal auditor attributes are affected by a conflict of interest?
A. Independence and authority.
B. Authority and proficiency.
C. Independence and objectivity.
D. Objectivity and due professional care.
Answer: C
Q313. Some of a company's payroll transactions were batch posted to the payroll file but were not uploaded correctly to the general ledger file on the mainframe. The best control to detect this type of error would be.
A. Edit controls on the payroll file.
B. Appropriate segregation of duties for batch approval.
C. Validation of hash totals.
D. Reconciliation of paychecks to the bank account.
Answer: C
Topic 3, Volume C