Certified Internal Auditor - Part 2, Conducting the Internal Audit Engagement v8.0

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If an auditor is sampling to test compliance with a particular company policy, which of the following factors should not affect the allowable level of sampling risk?

  • A. The experience and knowledge of the auditor.
  • B. The adverse consequences of noncompliance.
  • C. The acceptable level of risk of making an incorrect audit conclusion.
  • D. The cost of performing auditing procedures on sample selections.


Answer : A

The most effective way for internal auditors to enhance the reliability of computerized financial and operating information is by:

  • A. Determining if controls over record keeping and reporting are adequate and effective.
  • B. Reviewing data provided by information systems to test compliance with external requirements.
  • C. Determining if information systems provide management with timely information.
  • D. Determining if information systems provide complete information.


Answer : A

Which of the following is a weakness that is inherent in the use of the test data method to test internal controls in a computer-based accounting system?

  • A. The auditor must test many transactions with the same condition in order to achieve assurance that the condition is being detected.
  • B. Conditions that were not specifically considered by the auditor may go untested.
  • C. The approach requires the creation of "dummy companies," possibly destroying or altering actual company data in the process.
  • D. Inclusion of atypical data in the test data may cause errors to be noted on the exception report.


Answer : B

Which of the following procedures would be most helpful in providing additional evidence when an auditor suspects that an unidentified employee is submitting and approving invoices for payment?

  • A. Use generalized audit software to identify invoices from vendors with post office box numbers or other unusual features. Select a sample of those invoices and trace to supporting documents such as receiving reports.
  • B. Select a sample of payments made during the year and investigate each one for approval.
  • C. Select a sample of receiving reports representative of the period under investigation and trace to approved payment. Note any items not properly processed.
  • D. Select a sample of invoices paid during the past month and trace them to appropriate vendor accounts.


Answer : A

Which of the following would provide the best evidence of compliance with an airline's standard of having aircraft refueled and cleaned within a specified time of arrival at an airport?

  • A. Vendor fuel invoices that have been reconciled to inventory records.
  • B. Time cards completed by aircraft cleaning and fueling crews.
  • C. Observation of selected aircraft while they are being refueled and cleaned.
  • D. Comparison of the standard hourly labor costs for cleaning and fueling personnel with actual labor charges.


Answer : C

Direct staff as a percentage of total staff is an example of which of the following types of efficiency measures?

  • A. Productivity ratio.
  • B. Productivity index.
  • C. Operating ratio.
  • D. Resource utilization rate.


Answer : C

Given the scarcity of internal audit resources, a chief audit executive (CAE) decided not to schedule a follow-up of audit recommendations when developing engagement work schedules. Does the CAEs decision violate the Standards?

  • A. No, because the Standards do not specify whether follow-up is needed.
  • B. No, because when there is evidence of sufficient motivation by the client, there is no need for follow-up action.
  • C. Yes, because scarcity of resources is not a sufficient reason to omit follow-up action.
  • D. Yes, because the Standards require the auditors to determine whether the client has appropriately implemented all of the auditor's recommendations.


Answer : C

Which of the following is an example of the verification of internal documentary evidence?

  • A. Reviewing a carrier's bill of lading.
  • B. Reconciling a vendor's month-end statement.
  • C. Vouching a copy of a sales invoice to receivables.
  • D. Recalculating a customer's purchase order.


Answer : C

As part of an operational audit of the shipping department, an auditor selected a sample of
45 daily shipping logs from the department's files. On 44 of the days, the log contained a sufficient number of shipments to meet the department's daily quota. Based on this test, the auditor concluded that the shipping department was effective at meeting its quotas.
Which of the following is true about the auditor's conclusion?

  • A. The number of items selected for testing is inadequate to justify the conclusion.
  • B. The shipping department is effective in meeting its responsibilities.
  • C. This conclusion would negate any need to perform tests of efficiency.
  • D. None of the above.


Answer : D

Which of the following performance criteria would be most useful when measuring the performance of a customer service desk?

  • A. The number of customer inquiries recorded per day.
  • B. The percentage of customer issues resolved within 24 hours.
  • C. The number of customer complaints recorded per day.
  • D. The percentage of total customers served per day.


Answer : B

Which of the following situations might allow an employee to steal checks sent to an organization and subsequently cash them?

  • A. Checks are not restrictively endorsed when received.
  • B. Only one signature is required on the organization's checks.
  • C. One employee handles both accounts receivable and purchase orders.
  • D. One employee handles both cash deposits and accounts payable.


Answer : A

Which of the following would be a red flag that indicates the possibility of inventory fraud?
I. The controller has assumed responsibility for approving all payments to certain vendors.
II. The controller has continuously delayed installation of a new accounts payable system, despite a corporate directive to implement it.
III. Sales commissions are not consistent with the organization's increased levels of sales.
IV. Payments to certain vendors are supported by copies of receiving memos, rather than originals.

  • A. I and II only
  • B. II and III only
  • C. I, II, and IV only
  • D. I, III, and IV only


Answer : C

The efficiency of internal audit operations is best enhanced if workpaper standards:

  • A. Permit the extent of documentation to vary according to engagement objectives.
  • B. Require supervisors to initial and date each workpaper that they review.
  • C. Allow access to workpapers by external parties if approved by senior management or the audit committee.
  • D. Mandate the workpaper retention period.


Answer : A

Access control software on an organization's mainframe computer records detailed information concerning both successful and unsuccessful log-on attempts to applications.
Which of the following audit tools would be best suited to review the access information that has been recorded?

  • A. Generalized audit software.
  • B. Flowcharting.
  • C. Integrated test facility.
  • D. Test data.


Answer : A

What would be used to determine the collectability of accounts receivable balances?

  • A. The file of related shipping documents.
  • B. Negative accounts receivable confirmations.
  • C. Positive accounts receivable confirmations.
  • D. An aged accounts receivable listing.


Answer : D

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Exam contains 516 questions
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