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Q151. Which aspect of the audit function would be most impacted by a lack of coordination between an organization's internal and external auditors?
A. Responsiveness.
B. Timeliness.
C. Effectiveness.
D. Efficiency.
Answer: D
Q152. An organization's accounts payable function improved its internal controls significantly after it received an unsatisfactory audit report.
When planning a follow-up audit of the function, what level of detection risk should be expected if the audit and sampling procedures used are unchanged from the prior audit?
A. Detection risk is lower because control risk is lower.
B. Detection risk is lower because control risk is higher.
C. Detection risk is higher because control risk is lower.
D. Detection risk is unchanged although control risk is lower.
Answer: D
Q153. During a payroll audit of a large organization, an auditor noted that the assistant personnel director is responsible for many aspects of the computerized payroll system, including adding new employees in the system; entering direct-deposit information for employees; approving and entering all payroll changes; and providing training for system users. After discussions with the director of personnel, the auditor concluded that the director was not comfortable dealing with information technology issues and felt obliged to support all actions taken by the assistant director. The auditor should:
A. Continue to follow the engagement program because the engagement scope and objectives
have already been discussed with management.
B. Review the engagement program to ensure testing of direct deposits to employee bank
accounts is adequately covered.
C. Recommend to the chief audit executive that a fraud investigation be started.
D. Test a sample of payroll changes to ensure that they were approved by the assistant director
before being processed.
Answer: B
Q154. Which of the following would be the least significant consideration when performing a risk analysis?
A. Financial exposure and potential loss.
B. Skills available within the audit staff. C. Results of prior audits.
D. Major operating changes.
Answer: B
223. Which of the following is correct regarding the implementation of a quality assurance and improvement program for the internal audit function?
A. The board has the primary responsibility for implementation of a robust quality assurance and improvement program for internal audit.
B. An internal audit function that is fully complying with internal assessment of quality can confidently claim it is performing in conformity with the International Professional Practices Framework.
C. The chief audit executive can establish a formal quality assurance and improvement program that is led by an audit manager.
D. A quality assurance and improvement program is applicable depending on the size and complexity of the audit function.
Answer: C
Q155. 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 professionaljudgmentsand conclusions are made.
D. It is required to demonstrate that effective engagement supervision has occurred.
Answer: C
Q156. Which of the following statements is correct with regard to risk management?
A. The board's responsibility for risk management cannot be assigned to a board committee,such as a board risk committee.
B. The chief audit executive is accountable to the board for designing,implementing and monitoring the risk management process.
C. The total process of risk management,which includes a related system of internal control,is the responsibility of the board.
D. The finance director is responsible for the overall implementation of the risk management process.
Answer: C
Q157. Which of the following lists these audit steps in the correct chronological order?
I. Create the engagement work program.
II. Conduct the exit conference.
III. Perform fieldwork.
IV. Schedule the audit engagement.
Issue a summary report of audit findings.
A. I,IV,III,II,V.
B. I,IV,II,III,V.
C. IV,I,III,II,V.
D. IV,III,I,V,II.
Answer: C
Q158. Which of the following best describes an appropriate form of working paper standardization?
A. Uniform cross referencing system.
B. Customized layouts for each specific audit area.
C. Comprehensive data lists from information databases.
D. Audit client review and approval.
Answer: A
Q159. Which of the following is the most significant disadvantage of using checklists to evaluate internal controls?
A. They serve as a reminder of what controls should exist in a process.
B. They require yes/no responses to specific questions,not open-ended responses.
C. They do not capture all controls that may exist.
D. They are useful in assessing risk.
Answer: C
Q160. 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.
Answer: B
Topic 4, Volume D
Q161. Which of the following are components of the COSO enterprise risk management framework?
1.
Objective setting.
2.
External environment.
3.
Data collection.
4.
Control activities.
A. 1 and 3only
B. 1 and 4only
C. 2 and 3only
D. 2 and 4only
Answer: B
Q162. Which of the following tools would provide the most useful depiction of a process flow that spans multiple departments in an organization?
A. A vertical flowchart of each department,showing inputs at the top and outputs at the bottom.
B. A narrative,with a section dedicated to the process of each department.
C. A combination of a flowchart,which shows the process,and a narrative,which indicates the related department.
D. A horizontal flowchart,with each department identified across the top and the process flow below.
Answer: D
Q163. Which of the following is the most appropriate outcome measure for assessing safety operations?
A. Number of inspections conducted.
B. Tests made of equipment.
C. Reduction in machine down time due to accidents.
D. Number of operations observed.
Answer: C
Q164. An internal audit activity has made a preliminary determination that a division of the organization has employed improper accounting practices.
Upon being informed, the head of the organization instructs the chief audit executive (CAE) to cease the investigation and to withhold the information from external auditors.
Which course of action should the CAE follow?
A. Report the communication to the organization's general counsel.
B. Report the instruction to the chairperson of the audit committee.
C. Inform the head of the organization that the investigation will continue as planned.
D. Inform the external auditors of the findings and the mandate to stop investigating.
Answer: B
Q165. To determine if a new computer system is improving the use of a manufacturer's limited facilities in serving the largest number of customers, an auditor should compare.
A. The number of reworked orders and their costs before and after system installation.
B. Inventory and materials handling costs before and after system installation.
C. The number of orders filled and their cycle times before and after system installation.
D. The number of reworked orders and orders filled before and after system installation.
Answer: C