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NEW QUESTION 46
According to The IIA's Code of Ethics, which of the following actions violates the principle of confidentiality?
- A. Providing personal tax preparation services for a fee for several employees during the lunch hour.
- B. Providing a friend with the marketing strategic plan, which she will use to prepare her university thesis.
- C. Agreeing to reword an observation to avoid the client complaining directly to the auditor's supervisor.
- D. Accepting a consulting request in the IT department without possessing the requisite experience.
Answer: B
NEW QUESTION 47
What is the primary purpose of a fishbone diagram?
- A. To plan and control complex projects, such as internal audits.
- B. To represent the frequencies of adverse conditions in a given process.
- C. To identify the possible causes of adverse conditions.
- D. To depict the areas of responsibility for departments in an organization.
Answer: C
NEW QUESTION 48
Which of the following is the best way to detect fraud?
- A. Conduct anti-fraud training.
- B. Perform background investigations.
- C. Implement process controls.
- D. Activate a whistleblower hotline.
Answer: D
NEW QUESTION 49
A new director was hired to lead the internal audit activity at a small start-up company. Which of the following assignments would impair the director's independence?
- A. Performing a pre-implementation review of the company's payroll application.
- B. Reviewing the company's policy for foreign currency translation adjustments for compliance with accounting standards.
- C. Preparing the financial statements for the company's defined contribution plan.
- D. Providing the COBIT framework as a possible IT management tool.
Answer: C
NEW QUESTION 50
Which of the following combinations of conditions is most likely a red flag for fraud?
- A. Occasional accounting department overrides and discontinuation of the anonymous fraud hotline due to infrequent use.
- B. Hiring an employee with a prior fraud conviction and yearly management review.
- C. The practice of surprise audits and the implementation of an employee support program.
- D. A veteran employee in upper management experiencing financial difficulties and recently implemented enhanced controls.
Answer: A
NEW QUESTION 51
The chief audit executive (CAE) routinely provides activity reports to the board during quarterly board meetings. Senior management has asked to review the CAE's board presentation before each board meeting so that any issues or questions can be discussed beforehand. The CAE should:
- A. Not provide activity reports to senior management because such matters are the sole province of the board.
- B. Provide the activity reports to senior management as requested and discuss any issues that may require action to be taken.
- C. Provide information to senior management that pertains only to completed audit engagements and observations available in published engagement final communications.
- D. Disclose only those matters in the activity reports that pertain to expenditures and financial budgets of the internal audit activity.
Answer: B
NEW QUESTION 52
A retail sales company has discontinued a product that normally sold for $100. During the first month of a sale of the product, a 20 percent discount was given. Later that sale price was reduced by an additional 40 percent. What was the overall discount from the original selling price?
- A. 48 percent.
- B. 52 percent.
- C. 30 percent.
- D. 60 percent.
Answer: B
NEW QUESTION 53
The last quality assessment of the internal audit activity identified three areas for improvement: the achievement of audit engagement objectives,quality of work,and staff development. According to IIA guidance,which of the following should be the chief audit executive's primary focus to achieve these recommended improvements?
- A. Employment of tools and techniques.
- B. Engagement supervision.
- C. Due professional care.
- D. Demonstrated compliance with procedures.
Answer: B
NEW QUESTION 54
An internal audit manager of a furniture manufacturing organization is planning an audit of the procurement process for kiln-dried wood. The procurement department maintains six procurement officers to manage 24 different suppliers used by the organization.
Which of the following controls would best mitigate the risk of employees receiving kickbacks from suppliers?
- A. The periodic rotation of procurement officers' assignments to supplier accounts.
- B. An automated computer report,organized by supplier,of any invoices for the same amount.
- C. Periodic inventories of kiln-dried wood at the organization's warehouse.
- D. A pre-award financial capacity analysis of suppliers.
Answer: A
NEW QUESTION 55
Risk assessments are valuable to the internal audit activity's planning process because they assist in:
- A. Identifying the audit universe or auditable activities that need to be reviewed.
- B. Eliminating all areas with low risk from the audit plan.
- C. Educating management on the importance of keeping the internal audit activity informed of organizational changes.
- D. Identifying risks that management and the internal auditors have overlooked.
Answer: A
Explanation:
Section: Volume B
NEW QUESTION 56
Which of the following risk management activities is most appropriate for an internal auditor to undertake?
- A. Impose risk management processes.
- B. Implement risk responses on management's behalf.
- C. Coordinate risk management activities.
- D. Review the management of key risks.
Answer: D
NEW QUESTION 57
What type of risk management strategy is being employed when an organization installs two firewalls to provide protection from unauthorized access to the network?
- A. Avoiding the risk of having a direct network connection to untrusted networks.
- B. Sharing the risk that either firewall could be compromised by hackers.
- C. Diversifying the risk that network access will not be available to legitimate, authorized users.
- D. Accepting the risk that there may be attempts at unauthorized access to the network.
Answer: C
NEW QUESTION 58
A chief audit executive (CAE) of a major retailer has engaged an independent firm of information security specialists to perform specialized internal audit activities. The CAE can rely on the specialists' work only if it is:
- A. Carried out in accordance with the Standards.
- B. Performed under the supervision of the information technology department.
- C. Performed in accordance with the terms of the contract.
- D. Carried out using standard review procedures for retailers.
Answer: A
NEW QUESTION 59
According to IIA guidance, which of the following must the internal auditor consider to meet the requirements for due professional care?
- A. The appropriateness of assurance procedures necessary to ensure all significant risks will be identified.
- B. The training courses necessary to enhance the internal auditor's knowledge, skills, and other competencies.
- C. The use of innovative technology and data analysis techniques.
- D. The extent of work needed to achieve the engagement's objectives.
Answer: D
NEW QUESTION 60
According to COSO,which of the following is not considered one of the components of an organization's internal environment?
- A. Framework to plan,executeand monitor activities.
- B. Knowledge and skills needed to perform activities.
- C. Authority and responsibility to resolve issues.
- D. Integrated responses to multiple risks.
Answer: D
NEW QUESTION 61
Which statement most accurately describes how criteria are established for use by internal auditors in determining whether goals and objectives have been accomplished?
- A. Management is responsible for establishing the criteria.
- B. Internal auditors should use professional standards or government regulations to establish the criteria.
- C. The industry in which a company operates establishes criteria for each member company through benchmarks and best practices for that industry.
- D. Appropriate accounting or auditing standards, including international standards, should be used as the criteria.
Answer: A
NEW QUESTION 62
This chief audit executive (CAE) engaged an internal auditor to consult on an organization's complex information technology system. Shortly after beginning the engagement, the auditor unexpectedly resigned. Unfortunately, this auditor was the only available auditor with the necessary expertise. The CAE will not be able to hire someone with similar expertise in time to meet a regulatory deadline. Which of the following would be the best course of action for the CAE to take?
- A. Continue with the engagement in order to meet the regulatory deadline, but highlight areas in the final report that might need to be revised in the future.
- B. Ask that a senior member of the organization's IT department with the required systems expertise join the audit team to assist in completing the engagement.
- C. Remove the planned engagement from the audit plan and explain to senior management the problems with moving forward without an auditor with the necessary expertise.
- D. Delay the engagement and inform the board of the situation, asking them to provide acceptable alternatives for completing the engagement.
Answer: D
NEW QUESTION 63
An internal auditor for a large computer company suspects that returned computer systems are being repackaged as new products and shipped to other customers before the defects have been repaired. Which of the following would be the most persuasive piece of evidence in support of the auditor's suspicions?
- A. Evidence of returned goods in the shipping and receiving area.
- B. An unusual number of customer complaints.
- C. The results of a complete physical inventory taken at year end.
- D. Credit memos issued after year end for goods shipped before year end.
Answer: B
Explanation:
Section: Volume D
Explanation
NEW QUESTION 64
Which of the following factors would cause an internal auditor to judge an account balance error to be material?
- A. The error involves an unusual transaction for the organization.
- B. The error concerns a data input function.
- C. The error pertains to an unverified transaction that is routine.
- D. The error involves a large percentage of net income.
Answer: D
Explanation:
Section: Volume D
NEW QUESTION 65
With regard to external assessments of an internal audit activity (IAA), which of the following is the chief audit executive required to discuss with the board?
- A. The simplest way for the external reviewer to join the IAA's organization, and the timeline of the external assessment.
- B. External reviewer conflicts of interest, and the timeline of the external assessment.
- C. The need for an external assessment more frequently than once every five years, and the simplest method for the external reviewer to join the IAA's organization.
- D. External reviewer conflicts of interest, and the need for an external assessment more frequently than once every five years.
Answer: D
NEW QUESTION 66
An auditor in charge was reviewing the workpapers submitted by a newly hired internal auditor. She noted that the new auditor's analytical work did not include any rating or quantification of the risk assessment results,and she returned the workpapers for correction. Which section of the workpapers will the new auditor need to modify?
- A. Condition section.
- B. Criteria section.
- C. Effect section.
- D. Cause section.
Answer: C
NEW QUESTION 67
A manufacturing firm uses hazardous materials in the production of its products. An audit of the firm's processes related to hazardous materials should include.
I. Recommending an environmental management system as part of policies and procedures.
II. Verifying the existence of tracking records for these materials from creation to destruction.
III. Using consultants to avoid self-incrimination of the firm in the event illegalities were detected in an environmental audit.
IV. Evaluating the cost provided for in an environmental liability accrual account.
- A. III and IV only
- B. I, III, and IV only
- C. II only
- D. I, II, and IV only
Answer: D
Explanation:
Section: Volume A
NEW QUESTION 68
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