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NEW QUESTION 73
When auditing the award of a major contract, which of the following should an internal auditor suspect as a red flag for a bidding fraud scheme?
1. Subsequent change orders increase requirements for low-bid items.
2. Material contract requirements are different on the actual contract than on the request for bids.
3. A high percentage of employees are charged to indirect accounts.
4. Losing bidders are hired as subcontractors.
- A. 1 and 3.
- B. 1 only
- C. 2 only
- D. 2 and 4.
Answer: D
Explanation:
Section: Volume F
NEW QUESTION 74
Which of the following is a detective control strategy against fraud?
- A. Performing background checks on employees.
- B. Implementing a control self-assessment.
- C. Requiring employees to attend ethics training.
- D. Performing a surprise audit.
Answer: D
NEW QUESTION 75
Which of the following is most likely to be an element of an effective compliance program?
- A. The organization obtains as much information as possible when performing background checks on employees.
- B. The internal audit activity is assigned responsibility for overseeing the program.
- C. The program is communicated to employees in a video format on a one-time basis.
- D. The organization uses monitoring systems designed to detect improper activity.
Answer: D
NEW QUESTION 76
In the area of business acumen, which of the following competencies would be the sole responsibility of an internal audit staff member?
- A. Maintaining industry-specific knowledge appropriate to the organization.
- B. Maintaining technical aspects of accounting standards and reporting processes.
- C. Understanding regulatory and legal framework and assessing its relevance.
- D. Assessing how IT contributes to organization objectives, risks, and relevance to audit.
Answer: C
NEW QUESTION 77
According to the Standards, which of the following must an internal auditor take into consideration when performing an assurance engagement of treasury operations?
I. The audit committee has requested assurance of the treasury department's compliance with a new policy on the use of financial instruments.
II. Treasury management has not instituted any risk management policies.
III. Due to the recent sale of a division, the amount of cash and marketable securities managed by the treasury department has increased by 350 percent.
IV. The external auditors have indicated some difficulties in obtaining account confirmations.
- A. I and II only
- B. II, III, and IV only
- C. I and IV only
- D. I, II, and III only
Answer: D
NEW QUESTION 78
According to the Standards, which of the following statements best describes the required content of the chief audit executive's (CAE) report to senior management and the board on the internal audit activity (IAA)?
- A. The CAE must report on significant risk exposures, control issues, and governance issues.
- B. The CAE must report on policies, procedures, and best practices of the IAA.
- C. The CAE must report on auditors' continuing education activities, staffing changes, and any outsourcing to external parties.
- D. The CAE must report on quality assurance techniques, statistical analysis methods, and other analytical processes used.
Answer: A
NEW QUESTION 79
Which of the following actions would be a violation of the IIA Code of Ethics?
- A. Reporting information that could be damaging to the organization, at the request of a court of law.
- B. Declining an audit engagement for which the auditor does not have the necessary experience or training.
- C. Excluding an issue in the final audit report after management has resolved the issue.
- D. Failing to return a free promotional pen to a vendor related to the audit activity.
Answer: C
Explanation:
Section: Volume D
Explanation
NEW QUESTION 80
Internal control processes in an organization require that all investments exceeding $20, 000 receive authorization from both the president and treasurer. After conducting a sample of these transactions, an auditor determined that 10 of the 500 investments in the sample had not included both required authorizations.
The sample has a five percent acceptable error rate. Based on this sample, which of the following actions should the auditor take?
- A. Contact the organization's investment broker and confirm all investments.
- B. Complete a comprehensive review of the organization's investment activity and compare variations over prior years.
- C. Confirm all of the investments with the organization's internal finance department.
- D. Determine that no further testing of investment authorizations is required.
Answer: D
Explanation:
Section: Volume D
Explanation/Reference:
NEW QUESTION 81
An internal auditor is conducting an engagement in the accounts payable department, which includes expressing an opinion at the micro level. According to IIA guidance, which of the following statements is true regarding micro-level opinions?
1. They are most effective when using a combination of current and prior engagement findings to draw conclusions.
2. They typically are based on defined procedures such as those found in an accounts payable reconciliation process.
3. They are discrete and not normally shared with senior management or the board.
4. They can rely on evidence taken from the work of other assurance activities across the organization.
- A. 1 and 2.
- B. 2 and 3.
- C. 1 and 3.
- D. 3 and 4.
Answer: B
NEW QUESTION 82
Which of the following is the most significant disadvantage of using checklists to evaluate internal controls?
- A. They are useful in assessing risk.
- B. They require yes/no responses to specific questions, not open-ended responses.
- C. They do not capture all controls that may exist.
- D. They serve as a reminder of what controls should exist in a process.
Answer: C
NEW QUESTION 83
According to IIA guidance, which of the following is the best example of a system application control?
- A. An input control over data integrity.
- B. A system development life cycle control.
- C. A physical security control over a data center.
- D. A program change management control.
Answer: A
NEW QUESTION 84
Line management of a manufacturing operation requests an operational audit. They are seeking recommendations for policies and procedures to enhance control over the operation. What should the internal audit activity do?
- A. Turn down the engagement because an operational audit should not review policies and
procedures. - B. Review the effectiveness of current policies and procedures but avoid making control recommendations due to impaired objectivity.
- C. Perform the engagement and make appropriate recommendations for policies and procedures.
- D. Turn down the engagement because recommending controls would impair future objectivity regarding this client.
Answer: C
NEW QUESTION 85
To assure that the technical proficiency of internal auditors is appropriate for the audit engagements to be performed, a chief audit executive should:
- A. Ensure that each newly hired auditor is qualified in all of the disciplines needed to accomplish the department's audit mission.
- B. Require all of the audit staff to pursue a minimum number of continuing professional education hours each year.
- C. Consider the scope of work and level of responsibility when establishing criteria for education and experience in filling internal auditing positions.
- D. Oversee a training program that matches the actual training provided with the interests of individual auditors.
Answer: C
NEW QUESTION 86
In advance of a preliminary survey, a chief audit executive sends a memorandum and questionnaire to the supervisors of the department to be audited. What is the most likely result of that procedure?
- A. It creates apprehension about the audit engagement.
- B. It is only useful for audits of distant locations.
- C. It involves the engagement client's supervisory personnel in the audit.
- D. It is an uneconomical approach to obtaining information.
Answer: C
NEW QUESTION 87
An internal auditor is checking the accuracy of a computer-printed inventory listing to determine whether the total dollar value of inventory is significantly overstated. Because there is no time or resources to check all items in the warehouse, a sample of inventory items must be used. If the sample size is fixed, which of the following would be the most accurate sampling approach?
- A. Select those items that are most easily inspected.
- B. Sample so that the probability of a given inventory item being selected is proportional to the number of units sold for that item.
- C. Sample so that the probability of a given inventory item being selected is proportional to its book value.
- D. Employ simple random sampling.
Answer: C
Explanation:
Section: Volume C
NEW QUESTION 88
While reviewing the workpapers of a new auditor,the auditor in charge discovered that additional audit procedures might be necessary. According to IIA guidance,which of the following would be most relevant for the auditor in charge to consider when making this decision?
- A. Engagement supervision.
- B. Coordination.
- C. Due professional care.
- D. Resource management.
Answer: C
NEW QUESTION 89
Which of the following processes or tools can be used as ongoing internal assessments of
the performance of the internal audit activity?
1.Analyses of audit plan completion and cost recoveries.
2.Selective peer reviews of work papers by staff involved in the respective audits.
3.Self-assessment of the internal audit activity with on-site validation by a qualified independent reviewer.
4.Feedback from audit customers and stakeholders.
- A. 3 and 4 only
- B. 1 only
- C. 1,2,and 4 only
- D. 1 and 2 only
Answer: C
NEW QUESTION 90
The chief audit executive is revising policies relating to independence and objectivity of the internal audit activity. Which of the following would be a part of the revised policies document?
- A. An auditor does not need to complete an annual conflict of interest form unless the auditor's independence status has changed.
- B. An auditor may provide consulting services relating to operations for which they had previous responsibilities.
- C. Any auditor that received gifts of low-value promotional items from an audit client must report it to their supervisor.
- D. Any auditor that received high-value gifts from an audit client must report it to their supervisor.
Answer: B
NEW QUESTION 91
An accounts receivable clerk receives cash payments, posts the payments to customer accounts, and prepares the daily cash deposit.
The clerk has been stealing some cash and manipulating the customer payments to hide the theft.
This fraud could be detected with which of the following controls?
- A. Monthly bank reconciliations are performed by the clerk on a timely basis.
- B. Total cash deposits for the month are reconciled to the cash receipts journal.
- C. Names, amounts, and dates on remittance advices are reconciled with the names, amounts, and dates recorded in the cash receipts journal.
- D. Total cash deposits are compared with the bank reconciliation.
Answer: C
Explanation:
Section: Volume E
NEW QUESTION 92
CORRECT TEXT
A fast-food company is developing a computer simulation involving arrival time at a drive-through restaurant. The distribution for arrival times is:
Time Single-Digit Random
Between Arrivals Probability Number Assigned
2 minutes
0.1 0
3 minutes
0.2 1,2
4 minutes
0.3 3,4,5
5 minutes
0.4 6,7,8,9
Six random numbers are selected to represent the arrival of six cars: 1, 6, 9, 0, 5, 6. What is the mean time between arrivals in this run of the simulation model?
- A. 3 minutes.
- B. 2 minutes.
- C. 5 minutes.
- D. 4 minutes.
Answer: D
NEW QUESTION 93
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