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NEW QUESTION 51
For which of the following fraud engagement activities would it be most appropriate to involve a forensic auditor?
- A. Independently evaluating conflicts of interests.
- B. Performing statistical analysis for data anomalies.
- C. Preparing evidentiary documentation.
- D. Assessing contracts for relevant terms and conditions.
Answer: C
NEW QUESTION 52
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. 3 and 4 only
- B. 2 and 3 only
- C. 1 and 4 only
- D. 1 and 2 only
Answer: C
Explanation:
Topic 5, Volume E
NEW QUESTION 53
According to the International Professional Practices Framework, the internal audit activity's decision to defer follow-up of recommendations and management's corrective actions until the next scheduled engagement for the area is justified when:
- A. The reported findings or recommendations are significant enough to require immediate action by management.
- B. Management has adequately understood and appropriately accepted the risk of not taking action to implement the recommendation.
- C. The significance of the finding or recommendation will allow auditors to perform monitoring by receiving periodic updates from management on corrective actions taken.
- D. The action taken by management to address the recommendation is sufficient when weighed against the importance of the finding.
Answer: D
NEW QUESTION 54
According to the International Professional Practices Framework, which of the following is correct regarding conducting and reporting follow-up activities by the internal audit activity (IAA)?
- A. Due to management changes, the IAA is advised by management that no further work will be done. Further follow-up work is not required as management has accepted the related risk.
- B. In situations where the identified risk may have a significant impact to the business and senior management has accepted the risk, it is not necessary for the CAE to inform the board of the decision.
- C. A newly appointed auditor immediately proceeds to conduct follow-up testing based on previous work performed for the engagement and then reports the results to the chief audit executive (CAE).
- D. Management has stopped implementing several key recommendations citing a growing disagreement with their effectiveness. The auditor communicates the situation to the CAE who then escalates the matter to senior management.
Answer: D
NEW QUESTION 55
The chief audit executive (CAE) notes that management has adopted the option of not taking action on an audit issue involving a sizeable risk which has been accepted in the past. Which would be an appropriate action by the CAE?
- A. Report the situation to the board for immediate resolution.
- B. Discuss the matter with management to determine a resolution.
- C. Close the issue by noting that follow-up will be completed as part of the next engagement.
- D. Accept management's decision as the same risk has been accepted in the past.
Answer: B
NEW QUESTION 56
Which of the following is an appropriate responsibility for the internal audit activity with regard to the organization's risk management program?
- A. Ensuring that a proper and effective risk management process exists.
- B. Identifying and ensuring that appropriate controls exist to mitigate risks.
- C. Attaining an adequate understanding of the entity's key mitigation strategies.
- D. Identifying and managing risks in line with the entity's risk appetite.
Answer: C
NEW QUESTION 57
A chief audit executive (CAE) received a detailed internal report of senior management's internal control assessment. Which of the following subsequent actions by the CAE would provide the greatest assurance over management's assertions?
- A. Determine whether management's operating style and the philosophy described in the report reflect the effective functioning of internal controls.
- B. Assert whether the described and reported control processes and systems exist.
- C. Assess whether senior management adequately supports and promotes the internal control culture described in the report.
- D. Evaluate the completeness of the report and management's responses to identified deficiencies.
Answer: D
NEW QUESTION 58
The chief audit executive (CAE) manages a large internal audit activity (IAA) reporting functionally to the audit committee and administratively to the chief risk officer. During the CAE's recent unplanned medical leave, several internal audit reports were completed and waiting for CAE approval, however, no formal delegation of authority was in place to anticipate this situation. In order to preserve the independence of the IAA, which of the following would be the most appropriate individual to review and approve these reports during the CAE's absence?
- A. Audit committee chair.
- B. Engagement lead auditor.
- C. Chief risk officer.
- D. External auditor.
Answer: B
NEW QUESTION 59
A payroll clerk enters payroll transactions into the general ledger. The staff accountant reconciles the payroll ledgers. The payroll manager issues the manual payroll checks. The checks are maintained in a locked cabinet.
The chief financial officer secures the keys to the cabinet. The payroll clerk distributes the manual checks.
The payroll manager reconciles the bank statements monthly. Which of the following audit steps best addresses the risk of fraud in the payroll process?
- A. Examine whether the payroll manager approves the reconciliations of ledgers.
- B. Determine whether the cabinet keys are secured properly.
- C. Vouch a sample of items on bank reconciliations to supporting documentation.
- D. Determine whether an approved list of voided checks exists.
Answer: C
NEW QUESTION 60
Company A has a formal comprehensive corporate code of ethics while company B does not.
Which of the following statements regarding the existence of the code of ethics in company A can be logically inferred?
I. Company A exhibits a higher standard of ethical behavior than does company B.
II. Company A has established objective criteria by which an employee's actions can be evaluated.
III. The absence of a formal corporate code of ethics in company B would prevent a successful audit of ethical behavior in that company.
- A. I and II only
- B. III only
- C. II only
- D. II and III only
Answer: C
NEW QUESTION 61
What is the primary factor that determines the depth and breadth of audit follow-up?
- A. The auditor's assessment of personnel responsible for correcting audit findings.
- B. The auditor's assessment of risk associated with the audit findings.
- C. The engagement client's written response to the audit findings.
- D. The availability of audit personnel and financial resources.
Answer: B
NEW QUESTION 62
Reviewing internal audit report drafts with clients is:
1.Required according to the Standards.
2.A form of courtesy.
3.Ethically mandated.
4.A form of validation.
- A. 3 and 4 only
- B. 2 and 3 only
- C. 2 and 4 only
- D. 1 and 2 only
Answer: C
NEW QUESTION 63
Which of the following actions are appropriate for the chief audit executive to perform when identifying audit resource requirements?
1.Consider employees from other operational areas as audit resources, to provide additional audit coverage in the organization.
2.Approach an external service provider to conduct internal audits on certain areas of the organization, due to a lack of skills in the organization.
3.Suggest to the audit committee that an audit of technology be deferred until staff can be trained, due to limited IT audit skills among the audit staff.
4.Communicate to senior management a summary report on the status and adequacy of audit resources.
- A. 2 and 4 only
- B. 1 and 3 only
- C. 1, 2, and 4
- D. 2, 3, and 4
Answer: C
NEW QUESTION 64
When establishing the internal audit activity's annual plan, which of the following would be the best source of potential audit engagement topics?
- A. The organization's budget.
- B. Risk factors utilized in the organization's risk models.
- C. Operations involving cash transactions.
- D. Recent changes in management objectives.
Answer: D
Explanation:
Section: Volume D
NEW QUESTION 65
An organization's board would like to establish a formal risk management function and has asked the chief audit executive (CAE) to be involved in the process. According to IIA guidance, which of the following roles should the CAE not undertake?
- A. Become involved in risk oversight committees, monitoring activities, and status reporting.
- B. Accept management's responsibility for risk management without board approval.
- C. Audit risk management processes.
- D. Manage and coordinate risk management processes.
Answer: B
NEW QUESTION 66
According to IIA guidance, which of the following should be considered when creating policies and procedures for the internal audit activity (IAA)?
- A. Number of auditors, structure of the IAA, and audit staff skills and competencies.
- B. Number of auditors, complexity of audit activities, and structure of the IAA.
- C. Complexity of audit activities, structure of the IAA, and audit staff skills and competencies.
- D. Number of auditors, complexity of audit activities, and audit staff skills and competencies.
Answer: B
Explanation:
Section: Volume C
NEW QUESTION 67
The newly appointed chief audit executive (CAE) of a large multinational corporation, with seasoned internal audit departments located around the world, is reviewing responsibilities for engagement reports. According to IIA guidance, which of the following statements is true?
- A. The CAE may delegate responsibility for reviewing, approving and signing engagement reports, but should review the reports after they are issued.
- B. The CAE is required to review, approve, and sign all regulatory compliance engagement reports only.
- C. The CAE is required to review, approve, and sign every engagement report.
- D. The internal audit charter must identify authorized signers of engagement reports.
Answer: A
NEW QUESTION 68
In performance auditing, which of the following must first be determined by the internal auditor?
- A. Which key performance indicators are in use.
- B. Determination that appropriate benchmarks are in place.
- C. Whether management controls are appropriate.
- D. Management's objectives for the process.
Answer: D
NEW QUESTION 69
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