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Q61. Which of the following situations would justify the removal of a finding from the final audit report?
A. Management disagrees with the report findings and conclusions in their responses.
B. Management has already satisfactorily completed the recommended corrective action.
C. Management has provided additional information that contradicts the findings.
D. Management believes that the finding is insignificant and unfairly included in the report.
Answer: C
Q62. An organization has an opening for an entry-level internal audit position. When interviewing for the position, which of the following is the least important skill for an entry-level internal auditor?
A. Conflict resolution skills.
B. Communication skills.
C. Time management skills.
D. Interpersonal skills.
Answer: A
Q63. Which of the following is the correct ratio to use in calculating the dollar value of the population if the auditor is using ratio estimation?
Number of Items Audited Value Carrying Amount Sample
$500,000 $480,000 Population 3,000 $5,000,000
A. 0.10
B. 0.96
C. 1.04
D. 10.00
Answer: C
Q64. The final internal audit report should be distributed to which of the following individuals?
A. Audit client management only
B. Executive management only
C. Audit client management, executive management, and others approved by the chief audit executive.
D. Audit client management, executive management, and any those who request a copy.
Answer: C
Q65. Which of the following would cause a company's accounts receivable turnover ratio to decrease steadily over a three-year period?
A. An increase in the discount offered for early payment.
B. A more liberal credit policy.
C. Invoices provided on a weekly rather than a monthly basis.
D. Increased cash sales.
Answer: B
Q66. Which of the following is not true regarding the management of internal audit resources?
A. A minimum level of information technology knowledge is necessary.
B. The adequacy of internal audit resources is ultimately a board responsibility.
C. Resources include external service providers and computer-assisted audit techniques.
D. Skills availability must be aligned with financial constraints.
Answer: D
Q67. What is the most likely source of information for a detailed schedule of a company's insurance policies in force?
A. Original journal entries found in the cash disbursements journal, along with supporting checks processed by the bank.
B. Policies and procedures governing insurance coverage.
C. The current fiscal year's budget for insurance, together with the beginning balance of the prepaid insurance account.
D. The files containing insurance policies with various carriers.
Answer: D
212. Confirmation would be most effective in addressing the existence assertion for:
A. The addition of a milling machine to a machine shop.
B. Sales of merchandise during the regular course of business.
C. Inventory held on consignment.
D. The granting of a patent for a special process developed by the organization.
Answer: C
Q68. An internal auditor is assigned to conduct an audit of security for a local area network (LAN) in the finance department of the organization. Investment decisions, including the use of hedging strategies and financial derivatives, use data and financial models which run on the LAN. The LAN is also used to download data from the mainframe to assist in decisions. Which of the following should be considered outside the scope of this security audit engagement?
A. Investigation of the physical security over access to the components of the LAN.
B. The ability of the LAN application to identify data items at the field or record level and
implement user access security at that level.
C. Interviews with users to determine their assessment of the level of security in the system and
the vulnerability of the system to compromise.
D. The level of security of other LANs in the company which also utilize sensitive data.
Answer: D
Q69. When determining the nature, timing, and extent of follow up, the chief audit executive considers all of the following factors except:
A. Significance of the reported observation or recommendation, degree of effort, and cost needed to correct the reported condition.
B. Impact that may result should the corrective action fail.
C. Authority and responsibility of the person required to take corrective action.
D. Complexity of the corrective action and time period involved.
Answer: C
Q70. Which of the following would be the most effective method to prevent installation of new equipment that does not meet environmental permit requirements, or to prevent modification of current processes in such a way that they no longer meet permit requirements?
A. Require that the environmental compliance department perform regular inspections of the manufacturing facility to identify new equipment or process modifications in progress.
B. Rely on annual inspections by various regulatory agencies to identify equipment or processes that require a permit.
C. Require that the staff of the environmental compliance department attend monthly safety meetings in different parts of the facility so that they can hear directly from the workers about any changes.
D. Include the environmental compliance department in the review of proposed process changes and equipment purchases affecting permit requirements.
Answer: D
Q71. Which of the following types of sampling techniques should an internal auditor use when testing the effectiveness of internal controls?
A. Mean-per-unit sampling.
B. Attributes sampling.
C. Variables sampling.
D. Dollar-unit sampling.
Answer: B
Q72. As part of an operational audit of the shipping department, an auditor selected a sample of 45 daily shipping logs from the department's files. On 44 of the days, the log contained a sufficient number of shipments to meet the department's daily quota. Based on this test, the auditor concluded that the shipping department was effective at meeting its quotas. Which of the following is true about the auditor's conclusion?
A. The number of items selected for testing is inadequate to justify the conclusion.
B. The shipping department is effective in meeting its responsibilities.
C. This conclusion would negate any need to perform tests of efficiency.
D. None of the above.
Answer: D
Q73. Risk assessments can vary in format, but generally include:
1.
A description of identified risks.
2.
Tests of audit controls.
3.
A system of rating risks.
4.
Sample size identification.
A. 1 and 2 only
B. 1 and 3 only
C. 1, 3, and 4 only
D. 2, 3, and 4 only
Answer: B
Q74. Which of the following methods would an auditor most likely use to document a complex sales order process?
A. Develop a horizontal flowchart, with supporting documentation for key control points.
B. Create a critical path method chart, noting the processes involved for each step.
C. Perform a process review, assigning time and cost to each step of the process to develop a hierarchy flowchart.
D. Utilize a systems narrative, which can be updated during subsequent audits.
Answer: A
Q75. When planning an audit engagement, what should an internal auditor first consider when assessing the risk of fraud in the area to be audited?
A. Impact of and exposure to fraud.
B. Existence of evidence of fraud.
C. Organizational structure.
D. Management's risk appetite.
Answer: A