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Internal Audit Fundamentals

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Question # 166

Which of the following actions is the internal audit activity best positioned within the organization to perform?

Options:

A.  

Determine organizational risk tolerances

B.  

Monitor the organization ' s risk mitigations

C.  

Determine the likelihood and impact of risks

D.  

Advise the board on risk management issues

Discussion 0
Question # 167

A subsidiary of the organization was preparing for an initial public offering (IPO). Af the request of the audit committee, the chief audit executive (CAE) and all senior audit staff were actively involved in the process by helping collect and validate financial data, conducting assessments, and participating in meetings with IPO advisors. Six months later, it became obvious that the IPO had to be canceled. Newly appointed audit committee members requested an assurance engagement that v/ould assess the IPO preparation process. Which of the following would be the best course of action for the chief audit executive (CAE) to take?

Options:

A.  

The decision to involve auditors in the IPO was made by former audit committee members; therefore, the CAE is not responsible and can proceed with the new assignment.

B.  

The CAE should reject the assignment, as such engagements are beyond the scope of auditors who are usually not familiar with root cause analysis methodology.

C.  

The engagement should be undertaken by audit assistants and other junior staff members who were not involved in the IPO process.

D.  

The CAE should disclose objectivity limitations to the audit committee and suggest alternatives, such as outsourcing the engagement.

Discussion 0
Question # 168

Which of the following principles of The IIA ' s Code of Ethics implies that internal auditors should refrain from performing assurance services when there is an impairment to audit independence that has not been declared?

Options:

A.  

Confidentiality.

B.  

Objectivity.

C.  

Integrity.

D.  

Competency.

Discussion 0
Question # 169

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

Options:

A.  

Automatic shut-off valve.

B.  

Auto-correct software functionality.

C.  

Confirmation with suppliers and vendors.

D.  

Safety instructions.

Discussion 0
Question # 170

Which of the following is true about a system of internal control?

Options:

A.  

Internal control should be updated at least annually.

B.  

Technology does not change the internal control landscape.

C.  

Strategy should fit the system of internal control.

D.  

Articulating measurable objectives is part of internal control.

Discussion 0
Question # 171

Which of the following scenarios would most significantly restrict the areas where internal audit could perform assurance services?

Options:

A.  

Regulators mandate specific audit engagements to be included in the audit plan.

B.  

The internal audit activity reports functionally to the chief financial officer

C.  

The internal audit activity reports administratively to the CEO and functionally to the audit committee.

D.  

The internal audit activity reports administratively to the chief financial officer.

Discussion 0
Question # 172

According to the IIA Code of Ethics, which of the following best describes the conduct of an internal auditor who demonstrates the principle of competency?

Options:

A.  

The auditor is prudent in the use and protection of information acquired in the course of his work.

B.  

The auditor does not accept anything that may impair or be presumed to impair his professional judgment.

C.  

The auditor does not perform services in a particular area when he lacks skills in that area.

D.  

The auditor performs work with honesty, diligence, and responsibility.

Discussion 0
Question # 173

Which of the following would best describe a control implemented to detect cash register disbursement fraud in a large retail store?

Options:

A.  

Separate the duties of processing and authorizing refunds on merchandise

B.  

Post signs in the register area prompting customers to ask for and examine their sales receipts

C.  

Periodically count the cash in the register and compare it to the expected amount

D.  

Use cash registers with internal tapes that are tamper proof and that require a manager to process voids or refunds

Discussion 0
Question # 174

Which should the internal auditor first consider when assessing fraud risks during an engagement?

Options:

A.  

Compare the organizations fraud strategies with the industry ' s strategies.

B.  

Review any related prior fraud investigations.

C.  

Investigate any related fraud allegations.

D.  

Communicate any suspicious fraud activities to management.

Discussion 0
Question # 175

The organization s procurement manager asks the internal auditor to deliver training to the procurement team on the organization’s third-party risk management process. Which of the following is the most appropriate response?

Options:

A.  

The internal auditor should reject the request it she previously worked in the procurement area to maintain objectivity

B.  

The internal auditor should reject the request if the internal audit team does not have the requisite expertise.

C.  

The internal auditor should accept the request and in fact she may assume some management responsibilities temporarily if the result is a relevant training benefit

D.  

The internal auditor may accept the request only if she defines the scope to ensure conformance with the Code of Ethics

Discussion 0
Question # 176

In which of the following scenarios would the chief audit executive (CAE) be required to decline the assignment?

Options:

A.  

The CAE would need to procure external services to deliver the internal audit assurance program.

B.  

There is no expertise within the internal audit team for detecting and investigating fraud.

C.  

There is no expertise within the internal audit team for auditing an IT engagement.

D.  

There is no available expertise on the internal audit team to perform a consulting engagement

Discussion 0
Question # 177

The chief audit executive (CAE) of a large organization has been asked by the board to assume responsibility for risk management and compliance operations, both of which are distinct departments within the organization and are subject to periodic audits by the internal audit activity In regards to future audits of these functions which of the following approaches would be most appropriate?

Options:

A.  

Audits of risk management and compliance functions should be overseen by a competent external assurance provider

B.  

Audits of risk management and compliance functions should be overseen by a senior audit manager within the internal audit activity other than the CAE

C.  

Audits of risk management and compliance functions should be conducted by internal auditors under the supervision of management from both functions

D.  

Audits of risk management and compliance functions should be earned out by a team of the most experienced auditors overseen by the CAE

Discussion 0
Question # 178

In which scenario might it be considered problematic for the chief audit executive (CAE) to provide assurance services over the payroll function?

Options:

A.  

The CAE previously undertook a consulting assignment in that area to improve processes,

B.  

A couple of years ago, the CAE performed accounting functions for the payroll department.

C.  

Prior to becoming the CAE, the CAE was the payroll manager.

D.  

The assurance review was initiated following issues identified during a consulting assignment requested by management.

Discussion 0
Question # 179

Applying ISO 31000, which of the following is part of the external context for risk management?

Options:

A.  

Risk treatment method based on risk evaluation.

B.  

Organizational culture, objectives, and processes.

C.  

The regulatory and competitive environment

D.  

The method of determining the risk level.

Discussion 0
Question # 180

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
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