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Essentials of Internal Auditing

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Question # 1

Which of the following policies promotes internal audit objectivity?

Options:

A.  

The chief audit executive (CAE) reports functionally to the CEO

B.  

The CAE s compensation is approved by the chief financial officer

C.  

The CAF's appointment is determined by the CEO

D.  

The CAE reports administratively to the chief operating officer

Discussion 0
Question # 2

An internal auditor was offered expensive tickets to a sporting event by the manager of an area that she was currently auditing. The auditor politely declined. Which of the following fundamental principles of the MA Code of Ethics did she display?

Options:

A.  

Confidentiality.

B.  

Independence.

C.  

Competency.

D.  

Objectivity

Discussion 0
Question # 3

Which of the following scenarios demonstrates nonconformance with the Standards?

Options:

A.  

An internal auditor failed to expand the engagement and include managements preferences when determining the scope of an upcoming assurance engagement.

B.  

An internal audit activity lacks the skills need to perform a high-risk security engagement included on the annual audit plan.

C.  

A chief audit executive fated to perform a risk assessment prior to preparing the audit plan

D.  

An internal audit activity has existed for two years and has not undergone external quality assessment

Discussion 0
Question # 4

Which of the following actions best demonstrates an internal auditor exercising due professional care?

Options:

A.  

Testing an entire population, even when a sample would suffice

B.  

Using technology and data analysis techniques for efficiency

C.  

Enhancing knowledge, skills, and other competencies through professional development

D.  

Establishing audit objectives, performing audit tests, and implementing missing controls

Discussion 0
Question # 5

According to IIA guidance, which of the following actions by a new chief audit executive would be most appropriate to gain an understanding of the current level of knowledge, skills, and competencies required by an internal audit activity to fulfill its responsibilities?

Options:

A.  

Identify gaps in the activity’s proficiency, based on criteria defined by a widely accepted competency framework.

B.  

Have a quality assessment review performed by an expert external entity.

C.  

Identify a mature internal audit activity to serve as a benchmark for measuring the internal audit activity’s competence.

D.  

Assess whether members of the internal audit activity understand and apply the 11As mandatory guidance.

Discussion 0
Question # 6

Senior management has requested that the internal audit activity review and amend policies where necessary when auditing the purchasing department. To which of the following would the chief audit executive most likely give primary consideration when responding to this request?

Options:

A.  

Auditor competency.

B.  

Internal audit independence.

C.  

Auditor objectivity.

D.  

Engagement scope.

Discussion 0
Question # 7

Which of the following scenarios best illustrates the concept of due professional care?

Options:

A.  

After establishing engagement objectives and reviewing a process, the internal auditor assured process owners that all significant risk events were identified and tested using a systematic, disciplined approach.

B.  

After conducting an audit based upon a predefined scope and objective, the internal auditor guaranteed management that the system of internal controls in an audited area operates effectively.

C.  

As head of the internal audit activity, the chief audit executive reported functionally to the organization's board and administratively to senior management.

D.  

As head of the internal audit activity, the chief audit executive ensures that engagement supervisors conduct post-engagement staff meetings.

Discussion 0
Question # 8

Which of the following best demonstrates organizational independence of the internal audit activity?

Options:

A.  

The chief audit executive (CAE) reports functionally to the CEO.

B.  

The CAE's compensation is approved by the chief financial officer.

C.  

The CAE's appointment Is determined by the CEO

D.  

The CAE reports administratively to the chief operating officer.

Discussion 0
Question # 9

The management at a national consumer goods organization implements a fair work and pay practice as well as a policy to treat employees equitably and consistently.

Which common characteristics of fraud will the practice and policy most likely reduce?

Options:

A.  

Pressure or incentive.

B.  

Opportunity.

C.  

Rationalization.

D.  

Commitment.

Discussion 0
Question # 10

Which of the following should an internal auditor take into consideration when making a judgement regarding whether management selected appropriate risk responses?

Options:

A.  

Significant risks

B.  

Risk capacity

C.  

Risk appetite

D.  

Risk tolerance

Discussion 0
Question # 11

According to MA guidance, which of the following is the most accurate statement regarding the internal audit charter?

Options:

A.  

The IIA's Code of Ethics must exist outside of the charter to maintain independence.

B.  

The charter must be approved by both senior management and the board.

C.  

The nature of consulting services does not need to be defined in the Internal audit charter.

D.  

The charter provides a framework for performing a broad range of value-added audit services.

Discussion 0
Question # 12

Which of the following statements is true regarding the role of the internal audit activity in the organization's risk management process?

Options:

A.  

The internal audit activity should not be responsible for developing the organization's risk management framework, even with appropriate safeguards.

B.  

The internal audit activity is typically responsible for alerting operational management to emerging risks and changes in regulatory scenarios

C.  

The internal audit activity may coach management on risk response scenarios if safeguards have been implemented.

D.  

The internal audit activity should avoid giving assurance regarding the accuracy of risk evaluations if safeguards have not been implemented.

Discussion 0
Question # 13

An internal audit activity is using the auditing-by-element approach to audit the organization's controls around corporate social responsibility. Which of the following would be an element for the internal audit activity to consider?

Options:

A.  

Working conditions.

B.  

Employees' families.

C.  

Marketplace competition.

D.  

Shareholders and investors

Discussion 0
Question # 14

An organization is considering purchasing a new banking software system and has asked the internal audit activity to evaluate the system. An internal auditor assigned to perform the engagement worked at the software company two years ago and is familiar with the system's design strengths and weaknesses. Which of the following is true regarding impairment to the auditor's objectivity?

Options:

A.  

This situation does not necessitate any action related to the auditor's objectivity.

B.  

The auditor should decline to perform the audit because personal conflicts of interest are likely.

C.  

The auditor must disclose to the chief audit executive that this situation may impair her objectivity.

D.  

The auditor can provide only consulting services, not assurance.

Discussion 0
Question # 15

During the closing meeting of a procurement audit, the business manager disagrees with the observation presented by the engagement supervisor and accuses the team of not understanding the procurement objectives The engagement supervisor blames the manager for impeding the audit What skillset should the chief audit executive utilize to manage this situation?

Options:

A.  

The ability to negotiate

B.  

The ability to use analytical tools

C.  

The ability to foresee issues

D.  

The ability to manage conflict

Discussion 0
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