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NEW QUESTION 16
Which of the following situations is most likely to impair internal audit objectivity?
- A. According to policy, the internal auditor must obtain approval from the CFO prior to requesting information for internal audit purposes.
- B. An internal auditor, who was an accounts receivable intern for the organization three years prior, performs an audit of the accounts receivable cycle.
- C. An internal auditor reports both functionally and administratively to the chief financial officer (CFO).
- D. An internal auditor performs an audit in a department that is led by the auditor's close friend.
Answer: D
NEW QUESTION 17
Which of the following statements describes impairment to the internal auditor's objectivity?
- A. An internal auditor receives a promotional gift that is available to the organization's employees.
- B. An internal auditor performs an assessment of the operations for which he was recently responsible.
- C. An internal auditor reduces the scope of an audit engagement due to budget restrictions.
- D. An internal auditor reviews a purchasing agent's contract drafts prior to their execution.
Answer: B
NEW QUESTION 18
Which of the following statements is true regarding assurance services provided to clients outside of the organization?
- A. Assurance services for outside clients are not covered under the internal audit charter.
- B. Assurance services for outside clients must be approved on a case-by-case basis by the board of directors.
- C. The nature of assurance services for outside clients should be defined in the internal audit charter.
- D. The nature of assurance services for outside clients is the same as for internal clients.
Answer: C
NEW QUESTION 19
According to IIA guidance, which of the following individuals would best be considered independent for the purpose of participating in an external assessment of the quality assurance and improvement program for an internal audit activity (IAA)?
- A. A former employee knowledgeable of the IAA who resigned three years earlier from the organization.
- B. An employee in an affiliated organization who has never worked directly with the IAA.
- C. An employee in the parent organization who has not had any previous contact with the IAA.
- D. A competent employee of an independent external organization that provides co-sourcing services to the IAA.
Answer: A
NEW QUESTION 20
Which of the following are generally recognized as essential elements of a corporate social responsibility program?
- A. Human rights and the environment.
- B. Organizational governance and financial reporting.
- C. Consumer issues and return on investment.
- D. Fair operating practices and government regulation.
Answer: A
NEW QUESTION 21
Which of the following actions would be characterized as a preventive control to safeguard inventory from the risk of theft?
1. Locking doors and physically securing inventory items.
2. Independently observing the receipt of materials.
3. Conducting monthly inventory counts.
4. Requiring the use of employee ID badges at all times.
- A. 1 and 3.
- B. 2 and 4.
- C. 2 and 3.
- D. 1 and 4.
Answer: D
NEW QUESTION 22
Which of the following is an example of a risk avoidance strategy?
- A. Selling a nonstrategic business unit.
- B. Limiting access to an organization's data center.
- C. Outsourcing a high-risk activity.
- D. Hedging against exchange rate variations.
Answer: A
NEW QUESTION 23
An internal auditor finds during an engagement that payment for the organization's general insurance policy is two months overdue. The issue is informally mentioned to the finance department which immediately submits the invoice for payment. The auditor decides to exclude this finding from the final audit report as the oversight was immediately corrected and there were no consequences because of this late payment.
Which of the following rules of conduct as described in the IIA Code of Ethics, did the auditor fail to uphold?
- A. Competency.
- B. Confidentiality.
- C. Objectivity.
- D. Integrity.
Answer: C
NEW QUESTION 24
The chief audit executive (CAE) of a mid-sized pharmaceutical organization has operational responsibility for the regulatory compliance function. The audit committee requests an assessment of regulatory compliance.
According to IIA guidance, which of the following is the CAE's best course of action?
- A. Contract with a third-party entity or external auditor to complete the assessment and report the results to senior management and the board.
- B. Have a regulatory compliance staff member perform a self-assessment, to be reviewed by a proficient internal auditor.
- C. Have a proficient internal audit staff member perform the audit and report the results of the assessment directly to senior management and the board.
- D. Have a proficient internal audit staff member perform the assessment and disclose the impairment in the audit report and to the board.
Answer: A
NEW QUESTION 25
An internal audit activity includes in its audit reports the assertion that its work is performed in conformance with the International Standards for the Professional Practice of Internal Auditing {Standards). A recent external quality assessment concluded that the internal audit activity had substantial deficiencies that impact its overall operations. According to IIA guidance, which of the following is the most appropriate action for issuing future audit reports?
- A. Refrain from indicating that the internal audit activity operates in conformance with the Standards until the chief audit executive confirms that the internal audit activity has addressed all areas of nonconformance and the audit committee has been notified.
- B. Update and reissue previous audit reports, removing the assertion that the internal audit activity operates in conformance with the Standards, and distribute them to all parties who received the original reports.
- C. Indicate that the internal audit activity operates in partial conformance with the Standards, as the internal audit activity has a quality assurance and improvement program in place to address deficiencies and has met the requirement for conducting an external assessment.
- D. Refrain from indicating that the internal audit activity operates in conformance with the Standards until another external assessment confirms that the significant areas of nonconformance have been addressed.
Answer: D
NEW QUESTION 26
Which two of the following are preventive controls in a check disbursement process?
1. Daily reconciliation of the bank account used for check disbursements and prompt follow-up of un-reconciled items.
2. Segregation of the following duties: establishing new vendors, approving checks, and reconciling the bank account.
3. An activity report detailing who accesses the check disbursement system and the nature of any action taken in the system.
4. Evidence of strong access controls ensuring that authorized individuals have access only to the functions related to their responsibilities.
- A. 1 and 3.
- B. 2 and 4.
- C. 2 and 3.
- D. 1 and 4.
Answer: B
NEW QUESTION 27
According to IIA guidance, which of the following practices by the chief audit executive (CAE) best enhances the organizational independence of the internal audit activity?
- A. CAE meets privately with The board at least annually.
- B. CAE reports to the board regarding audit staff performance evaluation and compensation.
- C. CAE reviews and approves the annual audit plan.
- D. CAE meets privately with The CEO at least annually.
Answer: B
NEW QUESTION 28
According to IIA guidance, which of the following statements describes one of the similarities between assurance and consulting services?
- A. When planning assurance and consulting engagements, internal auditors must consider the strategies and objectives of the activity being reviewed.
- B. Internal auditors must not provide assurance or consulting services for an activity for which they had responsibility within the previous year.
- C. Both assurance and consulting services generally involve the internal auditor, the area under review, senior management, and the board.
- D. Internal auditors determine the engagement objectives, scope, and work program for both assurance and consulting services.
Answer: A
NEW QUESTION 29
Which of the following audit procedures would provide the most relevant information to identify discrepancies between budgeted versus actual raw material consumption in a production facility?
- A. Document verification.
- B. Inquiry.
- C. Observation.
- D. Analytical review.
Answer: D
NEW QUESTION 30
Which of the following audit techniques is used to evaluate control design while also embodying auditing's analytical process?
- A. A flowchart.
- B. A process narrative.
- C. A risk and control matrix.
- D. A walk-through.
Answer: C
NEW QUESTION 31
According to IIA guidance, which of the following statements is true regarding periodic internal assessments of the internal audit activity?
- A. An internal auditor may perform a peer review of a colleague's workpapers, as long as the auditor wasn't involved in the audit under review.
- B. Internal assessments are conducted to benchmark the internal audit activity's performance against industry best practices.
- C. Follow-up to ensure appropriate improvements are implemented is a recommended, but not mandatory, element of internal assessments.
- D. Internal assessments must be performed at least once every five years by a qualified assessor.
Answer: A
NEW QUESTION 32
Which of the following would provide the best guidance to a chief audit executive who is setting internal audit staff requirements?
- A. Results from discussions of audit needs with executive management and the audit committee.
- B. Information about the audit staff size and composition of comparable organizations.
- C. The results of the audit staff's most recent performance reviews.
- D. A review of audit staff education and training records.
Answer: A
NEW QUESTION 33
If an engagement client disputes that a specific action or process is within the scope of the internal audit activity, what would be the most appropriate way for the internal audit activity (IAA) to respond?
- A. Terminate only the specific action or process with which the client disagrees and work to determine a substitute function that will not impede further IAA or the client-audit relationship.
- B. Terminate the audit engagement in full because an operational audit will not be productive without the client's cooperation.
- C. Seek the approval of senior management or the board in mediation, allowing an overseer to clarify the scope of the audit engagement for the client.
- D. Refer the client to the IAA's charter and the approved yearly audit plan, which includes the areas designated for audit in the current time period.
Answer: D
NEW QUESTION 34
Forty-five percent of an organization's customer payments are submitted online. Eight percent of online payments are rejected. Executive management decides to outsource its online payment services to a contractor that will assume 75 percent of the total value of rejected payments. The organization estimates $1.25 million customer payments due during the contract period.
Which of the following represents the organization's residual risk for online customer payments due?
- A. $25, 000
- B. $11, 250
- C. $33, 750
- D. $45, 000
Answer: B
NEW QUESTION 35
Which the following activities should be performed by the internal audit activity to facilitate an effective relationship with the audit committee?
1. Periodically report about the accounting standards followed by the organization.
2. Provide assurance to the audit committee that its charter, activities, and processes are appropriate.
3. Ensure that the role and activities of the internal audit activity are clearly understood and responsive to the needs of the audit committee.
4. Maintain open and effective communications with the audit committee.
- A. 1, 3, and 4 only
- B. 1 and 2 only
- C. 2, 3, and 4 only
- D. 3 and 4 only
Answer: C
NEW QUESTION 36
According to The MA Global Internal Audit Competency Framework, which of the following areas of training would best assist the internal audit activity in improving its use of tools and techniques?
- A. Financial accounting.
- B. Project management.
- C. Negotiation and conflict resolution.
- D. Ethics and fraud.
Answer: B
NEW QUESTION 37
While auditing an organization's credit approval process, an internal auditor learns that the organization has made a large loan to another auditor's relative. Which course of action should the auditor take?
- A. Proceed with the audit engagement, but do not include the relative's information.
- B. Immediately withdraw from the audit engagement.
- C. Disclose in the engagement final communication that the relative is a customer.
- D. Have the chief audit executive and management determine whether the auditor should continue with the audit engagement.
Answer: D
NEW QUESTION 38
An internal auditor notes that employees are able to download files from the internet. According to IIA guidance, which of the following strategies would best protect the organization from the risk of copyright infringement and licensing violations resulting from this practice?
- A. Install a software inventory management application.
- B. Utilize dedicated and encrypted network connections.
- C. Apply antivirus and patch management software.
- D. Utilize secure socket layer encryption.
Answer: A
NEW QUESTION 39
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