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Essentials of Internal Auditing

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Question # 1

The internal audit activity is responsible for which of the following actions related to an organization’s internal controls?

Options:

A.  

Mitigating risks affecting achievement of organizational objectives.

B.  

Enabling opportunities affecting achievement of organizational objectives.

C.  

Analyzing and advising regarding costs versus benefits of control activities,

D.  

Attesting to fairness of financial statements.

Discussion 0
Question # 2

Which of the following is an example of an entity-level control pertaining to the finance area of an organization'?

Options:

A.  

Key account reconciliation such as bank reconciliation

B.  

Segregation of duties between posting and reviewing journal entnes

C.  

A signing authority matrix for spending approvals

D.  

The establishment of a finance and audit committee

Discussion 0
Question # 3

Which of the following is an example of a risk reduction strategy?

Options:

A.  

Outsourcing the payroll function.

B.  

Absorbing the cost of losses.

C.  

Insuring fixed assets.

D.  

Installing cameras around the plant

Discussion 0
Question # 4

Why is it imperative for the chief audit executive to track and develop the educational qualifications of internal audit staff?

Options:

A.  

To accurately conduct performance appraisals

B.  

To ensure that staff complete required continuing professional education credits annually.

C.  

To ensure that the resources needed to complete the audit plan are available.

D.  

To satisfy the audit committee requirements.

Discussion 0
Question # 5

Which of the following represents an example of an ethical issue that the organization should address'?

Options:

A.  

An employee discovered that there is no personal protective equipment at a temporary construction site

B.  

An employee saw that a group of other employees were smoking in close proximity to petrol distribution tanks

C.  

A supervisor insists that an employee complete time sheets regularly

D.  

An employee received concert tickets from a vendor and asked whether she could keep them

Discussion 0
Question # 6

During a complex financial compliance engagement, a senior internal auditor determines that current audit procedures are not sufficient for adequate testing She consults with a colleague and learns that a spreadsheet application contains a helpful tool She proceeds to use the tool to properly complete the evaluation Which of the following best describes the core competency displayed by the senior auditor?

Options:

A.  

Business acumen

B.  

Persuasion and collaboration

C.  

Critical thinking

D.  

Communication

Discussion 0
Question # 7

A new company’s risk management function is developing its cybersecurity risk management program Which of the following actions should be the first priority when developing the program?

Options:

A.  

Start building a cybersecurity culture and set the desired behavior using a bottom-up approach

B.  

Determine the cybersecurity framework that will establish and report on the effectiveness of the program

C.  

Define the cybersecurity risk appetite and perform a cost-benefit analysis of the program

D.  

Raise cybersecurity awareness across various departments outside of the IT department

Discussion 0
Question # 8

Which of the following would be included in quality assurance and improvement program (QAIP) reporting?

Options:

A.  

Descriptions of standardized work practices.

B.  

Outcomes of internal audit key performance indicators.

C.  

Conformance of individual engagements with the Standards,

D.  

Annual summaries of consulting and audit engagements.

Discussion 0
Question # 9

Which of the following activities best demonstrates an internal auditor’s commitment to developing professional competencies?

Options:

A.  

Requesting to be part of all engagements on the annual audit plan.

B.  

Attending a series of locally offered training courses.

C.  

Completing a skills assessment and development plan for targeted training needs,

D.  

Attending a webinar on how to use data analytics

Discussion 0
Question # 10

Which of the following best describes the board’s role in establishing effective organizational governance?

Options:

A.  

The board is involved in approving operational policy

B.  

The board monitors key processes and procedures

C.  

The board has oversight responsibility for organizational resources

D.  

The board approves management's detailed plans and objectives

Discussion 0
Question # 11

A subsidiary of the organization was preparing for an initial public offering (IPO). Af the request of the audit committee, the chief audit executive (CAE) and all senior audit staff were actively involved in the process by helping collect and validate financial data, conducting assessments, and participating in meetings with IPO advisors. Six months later, it became obvious that the IPO had to be canceled. Newly appointed audit committee members requested an assurance engagement that v/ould assess the IPO preparation process. Which of the following would be the best course of action for the chief audit executive (CAE) to take?

Options:

A.  

The decision to involve auditors in the IPO was made by former audit committee members; therefore, the CAE is not responsible and can proceed with the new assignment.

B.  

The CAE should reject the assignment, as such engagements are beyond the scope of auditors who are usually not familiar with root cause analysis methodology.

C.  

The engagement should be undertaken by audit assistants and other junior staff members who were not involved in the IPO process.

D.  

The CAE should disclose objectivity limitations to the audit committee and suggest alternatives, such as outsourcing the engagement.

Discussion 0
Question # 12

Which of the following can be used to minimize employees’ resentment of controls?

Options:

A.  

Making sure employees are exempt from participating in control creation

B.  

Implementing controls without lengthy explanations of their purpose

C.  

Developing general constricting controls rather than detailed ones

D.  

Not using controls to achieve goals

Discussion 0
Question # 13

Which of the following describes a primary responsibility for the internal audit activity in helping management maintain effective controls?

Options:

A.  

Promoting continuous evaluation

B.  

Promoting continuous monitoring

C.  

Promoting continuous improvement

D.  

Promoting continuous reporting

Discussion 0
Question # 14

When a plant manager from within the organization is hired as a rotational internal auditor within the internal audit activity which area should he most likely be trained for immediately?

Options:

A.  

Industry knowledge

B.  

Project management

C.  

Leadership skills

D.  

Risk assessments

Discussion 0
Question # 15

Which of the following statements relating to risk management is true?

Options:

A.  

The high-level risk assessment performed during engagement planning is a detailed step-by-step analytical process

B.  

External auditors must be engaged to evaluate the potential for fraud and how the organization manages fraud risk

C.  

A lack of controls is acceptable if the risk is reduced to an acceptable level in some other way

D.  

Internal auditors are responsible for managing the risks of the organization

Discussion 0
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