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

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Exam contains 937 questions

In which of the following situations would it be most appropriate to employ the services of a forensic specialist?

  • A. Detection of unauthorized changes to source documents.
  • B. Review for misapplication of general computer controls over accounts receivable.
  • C. Investigation of ghost employees in a large business.
  • D. Verification of fixed assets in a manufacturing company.


Answer : A

The following is an excerpt from an audit engagement workpaper:
✑ A Company
✑ Accounts Receivable
✑ Date
Objective. To determine if the computer system is correctly recording all accounts receivable transactions.
Procedures: Judgmental selection of a sample of all accounts receivable balances greater than $50,000 for positive confirmation of balances.
Conclusion: Based on the results of testing wherein all but three confirmations were returned, the accounts receivable balance is fairly presented in all material respects.
Which of the following is true regarding the workpaper?

  • A. It is not appropriate to judgmentally select a sample when testing accounts receivable.
  • B. A conclusion should be reached only for the results of overall testing, not for individual procedures.
  • C. The audit procedures used are not consistent with the audit objective.
  • D. The format of the workpaper does not conform to the standard format for workpapers.


Answer : C

Which of the following trends found on financial reports would most likely indicate a possible problem?

  • A. A material decrease in the receivables turnover.
  • B. A material increase in inventory turnover.
  • C. A material increase in daily sales compared to total outstanding receivables.
  • D. A material increase in the acid-test ratio.


Answer : A

Which of the following situations would best support the decision of a chief audit executive (CAE) to defer follow-up activity at a branch office until the next audit engagement?

  • A. An audit of the branch office is routinely scheduled every three years.
  • B. On-site follow-up of a remote branch may not be feasible due to travel costs.
  • C. Branch office management states that correction of the audit issue may take longer than expected.
  • D. The CAE and management agree that the corrective action taken to date is sufficient.


Answer : D

When conducting research, which of the following is most important?

  • A. Using computer databases or the Internet to find all relevant sources.
  • B. Providing documentation of the reference sources.
  • C. Presenting only those facts that support the conclusion.
  • D. Presenting all contrary views to balance the opinion.


Answer : B

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. Four quarters is not a large enough sample on which to base a conclusion.
  • B. The auditor's workpapers are not sufficient to facilitate an efficient review of the auditor's work.
  • C. The auditor should have included the scratch paper in the workpapers.
  • D. The auditor should have considered whether the information in the board report was compiled efficiently.


Answer : B

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

The balanced scorecard approach differs from traditional performance measurement approaches because it adds which of the following measures?
I. Financial measures.
II. Internal business process measures.
III. Client satisfaction measures.
IV. Innovation and learning measures.

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


Answer : D

An auditor prepared a workpaper that consisted of a list of employee names and identification numbers as well as the following statement:
"A statistical sample of 40 employee personnel files was selected to verify that they contain all documents required by company policy 501 (copy attached). No exceptions were noted."
The auditor did not place any audit verification symbols on this workpaper. Which of the following changes would most improve the auditor's workpaper?

  • A. Use of audit verification symbols to show that each file was examined.
  • B. Removal of the employee names to protect their confidentiality.
  • C. Justification for the sample size.
  • D. Listing of the actual documents examined for each employee.


Answer : C

During an interview with a manager in a company's claims department, an auditor noted that the manager became nervous and changed the subject whenever the auditor raised questions about certain types of claims. The manager's answers were consistent with company policies and procedures. When documenting the interview, the auditor should:

  • A. Document the manager's answers, noting the nature of the nonverbal communication.
  • B. Document the manager's answers but not the nonverbal communication because it is subjective and is not corroborated.
  • C. Conclude that the nonverbal communication is persuasive and that sufficient evidence exists to begin a fraud investigation.
  • D. Disregard the interview entirely because the verbal and nonverbal communications were contradictory.


Answer : A

Which of the following is true of engagement recommendations?
I. Specific suggestions for implementation must be included.
II. The internal auditor's observations and conclusions may serve as the basis.
III. Actions to correct existing conditions or improve operations may be included.
IV. Approaches to correcting or enhancing performance may be suggested.

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


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

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

According to the International Professional Practices Framework, which of the following statements is correct regarding the communication of audit results?
I. Summary reports may be issued separately from or in conjunction with the final report.
II. Interim reports may be written or oral.
III. Detailed reports should always be issued to the audit committee.
IV. Interim reports should be used to communicate information which requires immediate attention.

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


Answer : C

The chief audit executive (CAE) determined that based on management's oral response, the action taken regarding an audit observation was sufficient when weighted against the relative importance of the audit recommendation. Which of the following is the most appropriate step for the internal auditor to take next?

  • A. Initiate a follow-up audit to ensure that action has really been taken.
  • B. Follow-up with management until a written response is obtained.
  • C. Escalate the issue to the board and get their position on the issue.
  • D. Note in the permanent file that follow-up needs to be performed as part of the next engagement.


Answer : D

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Exam contains 937 questions

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