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Internal Audit Fundamentals

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Question # 151

The board requested the chief audit executive (CAE) to provide consulting services for a new systems implementation project Which of the following statements is true regarding this scenario?

Options:

A.  

The CAE should avoid making decisions on risk responses within risk management processes.

B.  

The CAE may only provide consulting and not assurance services in risk management processes

C.  

The CAE may manage the project risks on behalf of management in this particular situation

D.  

The CAE should avoid giving assurance on risk management processes in this particular situation

Discussion 0
Question # 152

According to IIA guidance, which of the following statements regarding ethics is true?

Options:

A.  

Business ethics may vary within an organization with both domestic and foreign operations.

B.  

Business ethics are universal in nature and organizations across the world are expected to comply with similar standards.

C.  

A business ethics policy for an organization is established solely to direct the behavior and expectations of employees.

D.  

Business ethics of an organization must remain independent from those of suppliers, customers, and business partners.

Discussion 0
Question # 153

An automobile manufacturer will become one of the first in the industry to adopt a new inventory management software. Despite the system being new to the market, senior management believes that the benefits are great enough to offset the potential risks. Which of the following aspects of risk management does senior management’s decision best illustrate?

Options:

A.  

Residual risk.

B.  

Inherent risk.

C.  

Risk tolerance.

D.  

Risk appetite.

Discussion 0
Question # 154

According to IIA guidance, which of the following actions is a chief audit executive required to take with regard to reporting the results of the quality assurance and improvement program?

Options:

A.  

Report external assessments upon completion of such assessments

B.  

Report external assessments at least annually

C.  

Report ongoing monitoring quarterly

D.  

Report post-engagement reviews at least once every five years

Discussion 0
Question # 155

Who has the ultimate responsibility of implementing the organization’s governance system?

Options:

A.  

Stakeholders

B.  

The board

C.  

The chief executive officer

D.  

Internal auditors

Discussion 0
Question # 156

The manager of the payroll department requested a review of the payroll process, but only wants the engagement to include processes related to approval of time worked. What type of activity is this?

Options:

A.  

Financial assurance engagement.

B.  

Operational consulting engagement.

C.  

Compliance assurance engagement.

D.  

Risk management consulting engagement.

Discussion 0
Question # 157

Which of the following best demonstrates internal auditors performing their work with proficiency?

Options:

A.  

Internal auditors meet with operational management at each phase of the audit process.

B.  

Internal auditors adhere to The IIA’s Code of Ethics.

C.  

Internal auditors work collaboratively with their engagement team.

D.  

Internal auditors complete a program of continuing professional development.

Discussion 0
Question # 158

Which of the following accurately describes the concept of inherent risk?

Options:

A.  

Risk factors that exist when controls are in place and operating effectively

B.  

Internal risk factors assuming no controls are in place

C.  

Risk factors that cannot be mitigated because they are innate to a process

D.  

Combination of internal and external risk factors in their pure state assuming no controls are in place

Discussion 0
Question # 159

Which of the following indicates an appropriate disclosure of a potential nonconformance with the Standards?

Options:

A.  

An external assessment of the internal audit activity was last performed six years ago.

B.  

The internal audit activity has been in existence for four years but has not performed an external assessment.

C.  

An internal assessment is not performed every year.

D.  

The internal audit activity has been in existence for two years and has documented only an internal assessment.

Discussion 0
Question # 160

Which of the following situations is most likely to threaten the independence of the internal audit activity?

Options:

A.  

The chief audit executive reports functionally to the board and administratively to the CEO.

B.  

The annual budget for the internal audit activity is approved by the chief financial officer.

C.  

The internal audit activity is completely outsourced to an external service provider.

D.  

The internal audit manager provides consulting services to the procurement department, where she worked during the prior year.

Discussion 0
Question # 161

The internal audit activity conducted an organization wide risk assessment. One of the most significant risks identified is associated with the oil price market. The chief audit executive (CAE) is considering including in the annual audit plan an assessment of the effectiveness of oil price risk management. The manager responsible commented that the assessment was not needed, as market risks were regularly addressed by the financial risk committee. If the CAE decides to include this activity in the annual audit plan anyway, how should it be recorded?

Options:

A.  

A consulting engagement independent of the financial risk committee's review.

B.  

A risk assessment.

C.  

An assurance engagement.

D.  

A joint consulting engagement with input from the financial risk committee.

Discussion 0
Question # 162

Which of the following statements is correct regarding disclosure of conformance or Standards?

Options:

A.  

An internal audit activity that has been in existence fewer than five years cannot Indicate that it is operating in conformance with the Standards because it has not yet undergone an external assessment.

B.  

Once an external assessment validates conformance with the Standards, the internal audit activity may continue to use the statement until the next external assessment.

C.  

If it has been more than five years since the last external assessment was conducted, the Internal audit activity must cease indicating that it operates in conformance with the Standards.

D.  

The chief audit executive must disclose every instance of noncompliance with the Code of Ethics or the Standards.

Discussion 0
Question # 163

Which of the following best describes the board’s role in establishing effective organizational governance?

Options:

A.  

The board is involved in approving operational policy

B.  

The board monitors key processes and procedures

C.  

The board has oversight responsibility for organizational resources

D.  

The board approves management's detailed plans and objectives

Discussion 0
Question # 164

During fieldwork, an internal auditor located a significant internal control issue. Without identifying the origins of the issue, the auditor concluded the engagement and included the issue in the final audit report. To enhance audit quality, which of the following skills should the internal auditor improve?

Options:

A.  

Business acumen.

B.  

Critical thinking.

C.  

Communication.

D.  

Audit report writing.

Discussion 0
Question # 165

A snow removal company is conducting a scenario planning exercise where participating employees consider the potential impacts of a significant reduction in annual snowfall for the coming winter. Which of the following best describes this type of risk?

Options:

A.  

Residual.

B.  

Net.

C.  

Inherent.

D.  

Accepted.

Discussion 0
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