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NEW QUESTION 106
Which of the following scenarios would represent the greatest threat to the authority of the internal audit activity (IAA)?
- A. Responsibility for risk management processes were removed from the IAA and placed under a newly created chief risk officer.
- B. A change was implemented requiring the IAA to report administratively to the organization's chief legal counsel rather than the board.
- C. The IAA was denied access to expenditure and budget requirement reports because the reports were considered to be financial administrative matters.
- D. An internal auditor was informed by the chief financial officer that client survey results would be unfavorable unless the auditor changed a finding in the report.
Answer: C
NEW QUESTION 107
Which of the following processes should be included in a benchmarking activity?
I.Identify key measures.
II.Collect data on performances and practices.
III.Identify opportunities for improvement.
- A. I and III only.
- B. II and III only.
- C. I, II, and III.
- D. II only.
Answer: C
NEW QUESTION 108
Which of the following would be the most important consideration by the internal audit activity when selecting employees to perform an internal quality assessment?
- A. The nature of their regular duties and responsibilities.
- B. Their reporting line within the organization.
- C. Previous experience working with the internal audit activity.
- D. Their understanding of auditing standards.
Answer: D
NEW QUESTION 109
According to the HA Code of Ethics, which of the following statements best describes the principle of competency?
- A. Internal auditors shall be prudent in the use of information acquired while performing their work.
- B. Internal auditors shall perform their work in accordance with the law and make disclosures expected by the law.
- C. Internal auditors shall perform their work in accordance with the Standards.
- D. Internal auditors shall perform their work with honesty, diligence, and responsibility.
Answer: C
NEW QUESTION 110
In an audit engagement, a group of internal auditors used an integrated test facility to test payroll processing. The auditors identified the key controls and processing steps in the computer software, and then developed test data. Over the course of 24 months, they submitted test transactions on a regular basis but did not find any differences between payroll processing and integrated test facility results. Based on the data, what can the auditors conclude?
- A. The computer application and its control procedures correctly processed payroll over the 24-month period.
- B. Payments to employees during the 24-month period were all correct.
- C. Employees are properly submitting their hours to payroll.
- D. The computer software is flawed.
Answer: A
NEW QUESTION 111
A manufacturing line supervisor joins the internal audit activity for a two-year rotational job assignment and is assigned to an accounts receivable audit. With regard to this assignment, which of the following should be the primary concern of the audit manager?
- A. Individual objectivity.
- B. Organizational independence.
- C. Due professional care.
- D. Individual independence.
Answer: C
NEW QUESTION 112
Which of the following would be the best example of a monitoring control for a chain of restaurants?
- A. Corporate management prepares a detailed analysis of gross margin per restaurant and investigates those showing a significantly lower gross margin.
- B. Each restaurant manager reconciles the cash received with the food orders recorded on the computer.
- C. All food orders must be entered through the computer, and there is segregation of duties between the food servers and the cooks.
- D. Proof of bank deposit is transmitted to corporate headquarters on a daily basis.
Answer: A
Explanation:
Section: Volume C
NEW QUESTION 113
Which of the following statements describes a control failure that is not directly attributable
to a customer billing application?
1.End users have raised a number of concerns regarding data integrity.
2.An untested program change is transferred from the test environment to production.
3.Purchase history does not reconcile with accounts receivable for some customers.
4.End user security is inadvertently granted to an unauthorized individual by management.
- A. 1 and 3.
- B. 1 and 4.
- C. 2 and 4.
- D. 2 and 3.
Answer: C
NEW QUESTION 114
According to the Standards,a review team must express an opinion on which of the
following when performing an external assessment of an internal audit activity?
1.Conformance with the Standards and IIA Code of Ethics.
2.Effectiveness of continuous improvement activities.
3.Feedback from internal audit customers and other stakeholder groups.
4.Efficiency and effectiveness of the internal audit activity's administration processes.
- A. 3only
- B. 1 and 2only
- C. 1only
- D. 2 and 4only
Answer: C
NEW QUESTION 115
Which of the following would be the most effective action for an internal audit activity to take in order to assist in improving an organization's ethical climate?
I.Review formal and informal processes within the organization that could promote unethical behavior.
II.
Conduct surveys of employees, suppliers, and customers regarding ethics.
III.
Assess the employees' knowledge of and compliance with the organization's code of conduct.
- A. I and II only.
- B. II and III only.
- C. I, II, and III.
- D. I only.
Answer: C
NEW QUESTION 116
Which of the following situations would most likely result in the auditor in charge (AIC) recommending that the staff auditor further investigate non-compliant items?
- A. A staff auditor conducted a test of 25 non-statistical sample items, selected judgmentally, and 5 are not in compliance with organizational policy.
- B. A staff auditor conducted a test of 85 non-statistical sample items, selected randomly, and 5 are not in compliance with organizational policy.
- C. A staff auditor conducted a test of statistical sample items, the results of which fall below the acceptable error rate by less than one percentage point.
- D. Before the staff auditor conducted a test of statistical sample items, the AIC was already aware of underlying control weaknesses.
Answer: A
Explanation:
Section: Volume D
NEW QUESTION 117
Which of the following is an activity that an internal auditor must not perform?
- A. Establish and provide continuing assurance on an anti-money laundering program for new hires.
- B. Assess the risk of being fined for ineffective anti-money laundering practices.
- C. Provide assurance for the effectiveness of anti-money laundering training.
- D. Survey employees for their understanding of anti-money laundering practices.
Answer: A
NEW QUESTION 118
During a routine audit of a customer service hotline, an internal auditor noticed that an unusually high number of customer complaints pertained to payments not being applied to the customers' accounts. Which of the following would most likely be the reason for the high volume of complaints?
- A. Check tampering by an employee.
- B. Poor controls in the invoice approval processes.
- C. Submission of fraudulent expense reports.
- D. An ineffective customer service department.
Answer: A
NEW QUESTION 119
What conclusion can be reached by comparing a random sample of vendor invoices to purchase orders?
- A. Authorized invoices were paid.
- B. Invoices were for authorized purchases.
- C. No duplicate payments were made.
- D. No duplicate invoices were received.
Answer: B
Explanation:
Section: Volume C
NEW QUESTION 120
Which of the following is not an appropriate control related to sales in a manufacturing company?
- A. Goods returned are inspected for damage by the sales department and then entered into inventory.
- B. Customers' orders are recorded promptly.
- C. Credit department approval is required for credit sales transactions.
- D. Goods shipped are matched with valid customer orders.
Answer: A
NEW QUESTION 121
A product manager occasionally overrides established purchasing policies in order to expedite the introduction of new products in a competitive industry. The manager's overrides are:
- A. Acceptable due to the highly competitive nature of the industry.
- B. Only acceptable if the override is within the manager's spending limit.
- C. Only acceptable if a policy governing such overrides is in place and they are reported.
- D. Unacceptable as they are not consistent with the purchasing policy.
Answer: C
NEW QUESTION 122
Which of the following, if observed, would not indicate the need to extend the search for other indicators of fraud in a purchasing department?
- A. The purchasing agents have convinced management to adopt a policy of paying vendors on amore timely basis in order to avoid incurring penalty charges.
- B. The cost of goods procured seems to be excessive in comparison with previous years.
- C. The internal control structure has significant weaknesses.
- D. The standard of living of one of the purchasing agents has increased.
Answer: A
NEW QUESTION 123
Why is a code of ethics for the internal audit profession necessary?
- A. It guides internal auditors in their service to others.
- B. It ensures that all members of the profession possess the same level of competence.
- C. It provides auditors with protection from lawsuits.
- D. It requires auditors to exhibit loyalty to their organizations.
Answer: A
NEW QUESTION 124
After being terminated due to downsizing, an internal auditor finds a different job with an organization in the same industry. Which of the following actions would violate the IIA Code of Ethics?
- A. In the first week at the new organization, the auditor discovers a high fraud risk surrounding the organization's database and suggests that the information technology department implement a new password system to prevent fraudulent actions before they occur.
- B. At the new organization, the auditor is asked to develop forms to implement probability-proportional-to-size sampling. Although unsure of how to perform this type of sampling, the auditor proceeds without asking for assistance.
- C. In preparing for an audit at the previous organization, the auditor had conducted a great deal of research on the Internet at home to identify best practices for the management of a treasury function. The auditor has retained much of the research and uses it to conduct an audit of the new employer's treasury function.
- D. To determine audit priorities in the new job, the auditor uses the audit risk approach that the auditor's previous employer used, without receiving permission to do so.
Answer: B
NEW QUESTION 125
Which of the following processes or tools can be used as ongoing internal assessments of the performance of the internal audit activity?
--- -
Analyses of audit plan completion and cost recoveries.
Selective peer reviews of work papers by staff involved in the respective audits.
Self-assessment of the internal audit activity with on-site validation by a qualified
independent reviewer.
Feedback from audit customers and stakeholders.
- A. 1, 2, and 4 only.
- B. 1 only.
- C. 1 and 2 only.
- D. 3 and 4 only.
Answer: A
NEW QUESTION 126
Which of the following statements about risk assessment is true?
- A. Risk assessment is the amount of inherent risk in a separately identifiable business entity.
- B. Risk assessment evaluates risk both on an inherent and residual basis.
- C. Risk assessment focuses on the quantitative evaluation of exposures.
- D. Risk assessment determines the organization's tolerance for exposure.
Answer: B
NEW QUESTION 127
When internal auditors perform consulting services that add value and improve an organization's operations, these services:
- A. Impose no responsibility to communicate information other than to the engagement client.
- B. Impair the internal auditors' objectivity with respect to an assurance service involving the same engagement client.
- C. Should be consistent with the internal audit activity's empowerment reflected in the charter.
- D. Would preclude the achievement of assurance from the consulting engagement.
Answer: C
NEW QUESTION 128
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