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NEW QUESTION 104
An internal auditor is assigned to conduct an audit of security for a local area network (LAN) in the finance department of the organization. Investment decisions, including the use of hedging strategies and financial derivatives, use data and financial models which run on the LAN. The LAN is also used to download data from the mainframe to assist in decisions. Which of the following should be considered outside the scope of this security audit engagement?
- A. The level of security of other LANs in the company which also utilize sensitive data.
- B. Investigation of the physical security over access to the components of the LAN.
- C. Interviews with users to determine their assessment of the level of security in the system and the vulnerability of the system to compromise.
- D. The ability of the LAN application to identify data items at the field or record level and implement user access security at that level.
Answer: A
NEW QUESTION 105
During an audit of a major metropolitan museum, an auditor was unable to locate selected items from the museum's collection. The director of the museum informed the auditor that the upcoming replacement of the museum's inventory tracking system would address the auditor's concerns. What follow-up activity should the auditor propose?
- A. Monitor the system implementation and schedule a follow-up review once the new system is in place.
- B. Schedule an audit of the museum's security systems to determine if theft is a problem.
- C. Determine whether the items are indeed missing and assess the ability of the new system to remedy the problem.
- D. Receive periodic feedback from museum staff regarding the status of the system implementation.
Answer: C
Explanation:
Section: Volume B
NEW QUESTION 106
An audit engagement objective at a manufacturer is to determine the quality of raw materials purchased. Which of the following actions would best enable an internal auditor to satisfy this objective?
- A. Research the rationale for customer returns.
- B. Analyze the percentage of scrap incurred during production.
- C. Evaluate the volume and characteristics of products rejected during processing.
- D. Analyze the provision for sales allowances.
Answer: C
NEW QUESTION 107
Which of the following actions has the least influence on the chief audit executive's development of an audit plan?
- A. An evaluation of the complexity of each audit engagement.
- B. Input from senior management and the board.
- C. An assessment of risk and exposures affecting the organization.
- D. Changes in the organizations structure or budget.
Answer: A
Explanation:
Section: Volume C
NEW QUESTION 108
The chief audit executive's responsibility regarding control processes includes:
- A. Overseeing the establishment of internal control processes.
- B. Ensuring that the internal audit activity assesses all control processes annually.
- C. Maintaining the organization's governance processes.
- D. Assisting senior management and the audit committee in the development of an annual assessment about internal control.
Answer: D
NEW QUESTION 109
According to the Standards, which of the following would least likely be considered a red flag when evaluating the risk for fraud?
- A. Health benefits are detected to be claimed for a deceased employee.
- B. Cash receipts appear to be lower than expected from an employee's cash drawer.
- C. An employee did not approve an internal report detailing expenses for the month.
- D. It is alleged that an employee is receiving vendor kickbacks.
Answer: C
Explanation:
Section: Volume D
NEW QUESTION 110
Productivity statistics are provided quarterly to a company's board of directors. An auditor checked the ratios and other statistics in the four most recent reports. The auditor used scratch paper and copies of the board reports to verify the accuracy of computations and compared the data used in the computations with supporting documents. The auditor wrote a note describing this work for the workpapers and then discarded the scratch paper and report copies. The auditor's note stated.
"The ratios and other statistics in the quarterly board reports were checked for the last four quarters, and appropriate supporting documents were examined. All amounts appear to be appropriate." In this situation:
- A. The auditor should have included the scratch paper in the workpapers.
- B. The auditor should have considered whether the information in the board report was compiled efficiently.
- C. The auditor's workpapers are not sufficient to facilitate an efficient review of the auditor's work.
- D. Four quarters is not a large enough sample on which to base a conclusion.
Answer: C
Explanation:
Section: Volume A
NEW QUESTION 111
Which of the following is a disadvantage of using flowcharts during a risk assessment?
- A. People cannot quickly understand the processes via flowcharts
- B. Some serious risks that are not part of the linear process can be missed
- C. Flowcharts are not applicable for evaluating the design of controls
- D. Flowcharts do not enable auditors to identify missing controls
Answer: B
NEW QUESTION 112
Due to the expanded role of internal audit in the organization, the chief audit executive (CAE) of a construction company decides to employ the services of an outsourced audit service provider to augment the internal audit staff. What does the CAE need to consider in determining whether the outsourced audit service provider possesses the necessary knowledge, skills and other competencies to perform an audit engagement?
- A. The financial interest that the external service provider may have in the organization.
- B. The reputation of the external service provider.
- C. Specific matters expected to be covered in the engagement communications.
- D. The extent of other ongoing services the external service provider may be performing for the organization.
Answer: B
NEW QUESTION 113
Which of the following is not a primary purpose for conducting a walk-through during the initial stages of an assurance engagement?
- A. To help develop process maps.
- B. To identify residual risks.
- C. To test the adequacy of controls.
- D. To determine segregation of duties.
Answer: C
NEW QUESTION 114
During the development of a purchasing system, an auditor reviewed the payment authorization program.
Which of the following actions should the auditor recommend for a situation in which the quantity invoiced is greater than the quantity received?
- A. Issue an exception report.
- B. Return the invoice to the vendor for correction.
- C. Authorize payment of the full invoice, but maintain an open purchase order record for the missing goods.
- D. Pay the amount billed and adjust the inventory account for the difference.
Answer: A
NEW QUESTION 115
Which of the following behaviors could represent a significant ethical risk if exhibited by an organization's board?
1. Intervening during an audit involving ethical wrongdoing.
2. Discussing periodic reports of ethical breaches.
3. Authorizing an investigation of an unsafe product.
4. Negotiating a settlement of an employee claim for personal damages.
- A. 3 and 4
- B. 1 and 2
- C. 1 and 4
- D. 2 and 3
Answer: C
Explanation:
Section: Volume E
NEW QUESTION 116
During an assurance engagement, an internal auditor noted that the time staff spent accessing customer information in large Excel spreadsheets could be reduced significantly through the use of macros. The auditor would like to train staff on how to use the macros. Which of the following is the most appropriate course of action for the internal auditor to take?
- A. The auditor must create a new, separate consulting engagement with the business process owner prior to performing the improvement task.
- B. The auditor may proceed with the improvement task without obtaining formal approval, because the task is voluntary and not time-intensive.
- C. The auditor should get permission to extend the current engagement, and with the process owner's approval, perform the improvement task.
- D. The auditor must not perform the training, because any task to improve the business process could impact audit independence.
Answer: C
Explanation:
Section: Volume E
NEW QUESTION 117
During the audit of a large decentralized supply chain function, the chief audit executive (CAE) receives serious allegations of fraud concerning the vice president responsible for this function. The CAE engages a third party to provide forensic audit services and lead the investigation portion of the engagement. As part of this team, which of the following would be an appropriate role for the investigator?
1.Authenticate the original approval signatures on contracts.
2.Interview personnel to understand the supply chain processes.
3.Provide certified copies of relevant original documents for the audit file.
4.Identify variances in pixels on original electronic documents.
- A. 1 and 2 only
- B. 3 and 4 only
- C. 2 and 3 only
- D. 1 and 4 only
Answer: D
NEW QUESTION 118
During the quarterly review of the internal audit activity's performance, the chief audit executive (CAE) notes that actual engagement hours consistently exceed the budget. Which of the following strategies would most likely help the CAE address this problem?
* The budget should consider time spent on similar engagements.
* The budget should consider the proficiency of the assigned auditors.
* The budget estimate should provide for unexpected delays.
* The budget should be specific as to time for each work assignment.
- A. 1 and 2 only
- B. 3 and 4 only
- C. 2 and 3 only
- D. 1 and 4 only
Answer: D
NEW QUESTION 119
Which of the following actions is related to the preliminary survey process?
- A. Completing a detailed test of controls.
- B. Preparing the engagement work program.
- C. Determining if controls are effective.
- D. Identifying the current controls.
Answer: D
NEW QUESTION 120
Which of the following documents should the chief audit executive review and approve?
1. Workpaper retention policy.
2. Audit committee meeting minutes.
3. Internal audit handbook.
4. Quarterly financial statements.
- A. 1 and 2 only
- B. 1, 3, and 4 only
- C. 2 and 4 only
- D. 1 and 3 only
Answer: D
NEW QUESTION 121
Direct staff as a percentage of total staff is an example of which of the following types of efficiency measures?
- A. Operating ratio.
- B. Resource utilization rate.
- C. Productivity ratio.
- D. Productivity index.
Answer: A
Explanation:
Section: Volume A
NEW QUESTION 122
The chief audit executive (CAE) of a large retail operation believes that senior management has accepted a level of risk that exceeds the organization's current risk tolerance with respect to a major expansion. The CAE plans to meet with senior management to discuss these concerns. According to IIA guidance, which of the following would be an appropriate course of action in preparation for this meeting?
Understand management's basis for the decision.
Advise the board of the concern and upcoming meeting.
Ascertain which members of management have accepted the risk.
Determine if management has the authority to accept the risk.
- A. 1 and 2 only
- B. 3 and 4 only
- C. 2 and 3 only
- D. 1 and 4 only
Answer: D
NEW QUESTION 123
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