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NEW QUESTION 185
Which of the following audit techniques provides for continuous monitoring and analysis of computer transactions for detailed auditing?
- A. Parallel simulation.
- B. Integrated test facility.
- C. Test data.
- D. Embedded audit routines.
Answer: D
NEW QUESTION 186
A post-audit questionnaire sent to audit clients is an effective mechanism for:
- A. Validating process flow.
- B. Promoting the internal audit activity.
- C. Improving future audit engagements.
- D. Substantiating audit observations.
Answer: C
NEW QUESTION 187
Which of the following is an example of the verification of internal documentary evidence?
- A. Reconciling a vendor's month-end statement.
- B. Recalculating a customer's purchase order.
- C. Reviewing a carrier's bill of lading.
- D. Vouching a copy of a sales invoice to receivables.
Answer: D
NEW QUESTION 188
During an audit of a major contract, an auditor finds that actual hours and dollars billed are consistently at or near budgeted amounts. This condition is a red flag for which of the following procurement fraud schemes?
- A. Cost mischarging.
- B. Bid rotation.
- C. Defective pricing.
- D. Fictitious vendor.
Answer: A
Explanation:
Section: Volume C
NEW QUESTION 189
Which of the following should be included in a privacy audit engagement?
1. Assess the appropriateness of the information gathered.
2. Review the methods used to collect information.
3. Consider whether the information collected is in compliance with applicable laws.
4. Determine how the information is stored.
- A. 1, 3, and 4 only
- B. 2 and 4 only
- C. 1 and 3 only
- D. 1, 2, 3, and 4
Answer: D
Explanation:
Section: Volume E
NEW QUESTION 190
When constructing a staffing schedule for the internal audit activity (IAA), which of the following criteria are most important for the chief audit executive to consider for the effective use of audit resources?
1. The competency and qualifications of the audit staff for specific assignments.
2. The effectiveness of IAA staff performance measures.
3. The number of training hours received by staff auditors compared to the budget.
4. The geographical dispersion of audit staff across the organization.
- A. 1 and 3
- B. 2 and 3
- C. 2 and 4
- D. 1 and 4
Answer: D
Explanation:
Section: Volume E
NEW QUESTION 191
Which of the following is the first step in the process where auditors and clients work together to evaluate the clients' system of internal control?
- A. Develop questionnaires.
- B. Identify objectives.
- C. Assess risks.
- D. Identify and assess controls.
Answer: B
Explanation:
Section: Volume B
NEW QUESTION 192
During a payroll audit of a large organization, an internal auditor noted that the assistant personnel director is responsible for many aspects of the computerized payroll system, including adding new employees in the system; entering direct-deposit information for employees; approving and entering all payroll changes; and providing training for system users. After discussions with the director of personnel, the auditor concluded that the director was not comfortable dealing with information technology issues and felt obliged to support all actions taken by the assistant director. The auditor should:
- A. Review the engagement program to ensure testing of direct deposits to employee bank accounts is adequately covered.
- B. Recommend to the chief audit executive that a fraud investigation be started.
- C. Test a sample of payroll changes to ensure that they were approved by the assistant director before being processed.
- D. Continue to follow the engagement program because the engagement scope and objectives have already been discussed with management.
Answer: A
Explanation:
Section: Volume C
NEW QUESTION 193
If an auditor used nonstatistical sampling instead of statistical sampling to estimate the value of inventory, which of the following would be true?
- A. The precision would be larger.
- B. The confidence level could not be quantified.
- C. The risk of incorrect acceptance would be higher.
- D. The projected value of inventory would be less reliable.
Answer: B
NEW QUESTION 194
According to IIA guidance, which of the following would not be a consideration for the internal audit activity (IAA) when determining the need to follow-up on recommendations?
- A. Complexity of the corrective action.
- B. Impact that may result should the corrective action fail.
- C. Degree of effort and cost needed to correct the reported condition.
- D. Amount of resources required to conduct the follow-up activities.
Answer: D
NEW QUESTION 195
An internal auditor provided the following statement about division A's performance during the month: "Because supplies of raw material X were scarce, division A's profits declined by 15 percent." Which of the following can be validly concluded from the auditor's statement?
I . Division A's production level declined by 15 percent.
II . Division A could have sold more products than it produced.
III . Division A usually sells all of the products that it produces.
- A. I and II only
- B. III only
- C. I only
- D. II only
Answer: D
NEW QUESTION 196
During an audit, an employee, who does not want to be identified, offers to provide information that would be damaging to the organization and may concern illegal activities. Which of the following actions by the auditor would not be consistent with the IIA Code of Ethics and Standards?
- A. Promising to maintain the employee's anonymity and listening to the information.
- B. Suggesting that the employee consider talking to legal counsel.
- C. Informing the employee that an attempt will be made to keep the source of the information confidential while looking into the matter further.
- D. Informing the employee of other methods of communicating this type of information.
Answer: A
Explanation:
Section: Volume C
Explanation
NEW QUESTION 197
The chief audit executive (CAE) of a new organization is in the process of determining the manner in which audit reports will be distributed and to whom. According to the Standards, which of the following is the most appropriate course of action for the CAE to take to develop this distribution process?
- A. The CAE should request that senior management and the board meet to determine the most appropriate reporting method.
- B. The CAE should meet with senior management for their input, but finalize the distribution of all reports with the board.
- C. The process should be determined in meetings with the external auditor and senior management to ensure alignment with external reporting.
- D. The CAE should independently implement the report distribution, using best judgment to ensure that all relevant stakeholders are informed.
Answer: B
Explanation:
Section: Volume D
Explanation
NEW QUESTION 198
Which of the following might alert an auditor to the possibility of fraud in a division?
I. The division is not scheduled for an external audit this year.
II. Sales have increased by 10 percent.
III.
A significant portion of management's compensation is directly tied to reported net income of the division.
- A. I and II only
- B. I, II, and III
- C. I only
- D. III only
Answer: D
NEW QUESTION 199
When assessing the risk associated with an activity, an internal auditor should:
- A. Modify the risk management process based on risk exposures.
- B. Determine how the risk should best be managed.
- C. Provide assurance on the management of the risk.
- D. Design controls to mitigate the identified risks.
Answer: C
NEW QUESTION 200
A governmental auditor was assigned to determine reasons why the students in one region scored significantly higher on education evaluation tests than did the students in another region. Previous research showed that there is a direct correlation between public financial support and student results. Which of the following is most likely to explain the difference in the regional results?
- A. The more successful region has increased educational spending by an average of 10 percent each year for the last three years, whereas the other region's increase averaged only three percent.
- B. The more successful region spends more money per student on education than does the other region.
- C. The more successful region spends 30 percent more money on education than does the other region.
- D. A higher percentage of the general tax fund is spent on education in the more successful region than in the other region.
Answer: B
Explanation:
Section: Volume A
NEW QUESTION 201
An internal auditor is evaluating controls over the purchasing function. The function includes the material control department, the purchasing department, and the receiving department. Which of the following is true regarding the presentation of the process flow among the three departments?
- A. Flowcharts are not useful for documenting process flow.
- B. A vertical flowchart of each department, showing inputs at the top and outputs at the bottom, would be most useful.
- C. Both a flowchart and narratives are needed due to the number of departments involved.
- D. A horizontal flowchart, with the departments described across the top and the process flowing horizontally, would be most useful.
Answer: D
NEW QUESTION 202
In advance of a preliminary survey, a chief audit executive sends a memorandum and questionnaire to the supervisors of the department to be audited. What is the most likely result of that procedure?
- A. It creates apprehension about the audit engagement.
- B. It is only useful for audits of distant locations.
- C. It involves the engagement client's supervisory personnel in the audit.
- D. It is an uneconomical approach to obtaining information.
Answer: C
Explanation:
Section: Volume C
NEW QUESTION 203
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