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NEW QUESTION 109
An organization is beginning to implement an enterprise risk management program. One of the first steps is to develop a common risk language. Which of the following statements about a common risk language is true?
- A. Decision makers will understand that the likelihood of missing or ineffective controls will be reduced.
- B. Stakeholders will have more assurance that the risks are assessed consistently.
- C. Internal auditors will be able to reduce their sample sizes because controls will be more consistent.
- D. Management will be able to reduce inherent risk because they will have a better understanding of risk.
Answer: B
Explanation:
Section: Volume F
NEW QUESTION 110
An internal auditor is reviewing a new automated human resources system. The system contains a table of pay rates which are matched to the employee job classifications. The best control to ensure that the table is updated correctly for only valid pay changes would be to:
- A. Require that all pay changes be signed by the employee to verify that the change goes to a bona fide employee.
- B. Ensure that adequate edit and reasonableness checks are built into the automated system.
- C. Require a supervisor in the department, who does not have the ability to change the table, to compare the changes to a signed management authorization.
- D. Limit access to the data table to management and line supervisors who have the authority to determine pay rates.
Answer: C
NEW QUESTION 111
To assure that the technical proficiency of internal auditors is appropriate for the audit engagements to be performed, a chief audit executive should:
- A. Oversee a training program that matches the actual training provided with the interests of individual auditors.
- B. Ensure that each newly hired auditor is qualified in all of the disciplines needed to accomplish the department's audit mission.
- C. Require all of the audit staff to pursue a minimum number of continuing professional education hours each year.
- D. Consider the scope of work and level of responsibility when establishing criteria for education and experience in filling internal auditing positions.
Answer: D
NEW QUESTION 112
It would be appropriate for an internal audit activity to use consultants with expertise in health-care benefits when the internal audit activity is:
I. Conducting an audit of the organization's estimate of its liability for post retirement benefits, which include health care benefits.
II. Comparing the cost of the organization's health care program with that of other programs offered in the industry.
III. Training its staff to conduct an audit of health care costs in a major division of the organization.
- A. II and III only
- B. I and III only
- C. I only
- D. I, II, and III.
Answer: D
NEW QUESTION 113
Which of the following would provide the best assessment of an organization's ethical climate?
- A. Number of years that directors have been appointed to the board.
- B. Clarity and consistency of consequences imposed by the board of directors for ethical violations.
- C. Frequency of fraud reported and results of subsequent investigations.
- D. Evidence of training provided to the board of directors on ethical issues.
Answer: B
Explanation:
Section: Volume B
NEW QUESTION 114
Which of the following is not an appropriate role of the internal audit activity in governance activities?
- A. Ensure the timely implementation of audit recommendations.
- B. Monitor compliance with the organization's ethics policies.
- C. Support the board in enterprise-wide risk assessment.
- D. Discuss areas of significant risk.
Answer: A
NEW QUESTION 115
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Which of the following would be a violation of the objectivity of a certified internal auditor?
Accepting a motivational book from a major vendor.
Attending a professional sporting event as the guest of a corporate supplier.
Performing an internal audit engagement for a division 18 months after having
controllership responsibility for that division.
Designing and implementing a corporate-wide utilities cost containment program.
- A. 2 and 4 only.
- B. 1 and 3 only.
- C. 2 and 3 only.
- D. 1, 3, and 4 only.
Answer: A
NEW QUESTION 116
A medical insurance provider uses an electronic claims-submission process and suspects that a number of physicians have submitted claims for treatments that were not performed. Which of the following control procedures would be most effective to detect this type of fraud?
- A. Require the physician to submit a signed statement attesting that the treatments had been performed.
- B. Use computer software to identify abnormal claims based on the insured's age and medical history.
- C. Send confirmations to the physicians, requesting them to verify the exact nature of the claims submitted to the insurance provider.
- D. Develop an integrated test facility and submit false claims to verify that the system is detecting such claims on a consistent basis.
Answer: B
Explanation:
Section: Volume F
NEW QUESTION 117
Forty-five percent of an organization's customer payments are submitted online. Eight percent of online payments are rejected. Executive management decides to outsource its online payment services to a contractor that will assume 75 percent of the total value of rejected payments. The organization estimates $1.25 million customer payments due during the contract period.
Which of the following represents the organization's residual risk for online customer payments due?
- A. $11,250
- B. $45,000
- C. $33,750
- D. $25,000
Answer: A
NEW QUESTION 118
Which of the following is an appropriate role for the board in governance?
- A. Preparing written organizational policies that relate to compliance with laws, regulations, ethics, and conflicts of interest.
- B. Ensuring that financial statements are understandable, transparent, and reliable.
- C. Working with the organization's attorneys to develop a strategy regarding current litigation, pending litigation, or regulatory proceedings governance.
- D. Assisting the internal audit activity in performing annual reviews of governance.
Answer: B
NEW QUESTION 119
An internal auditor is using mean-per-unit sampling to estimate the value of health benefit
claims for a period. The auditor's desired precision is $20,000. If the achieved precision is $10,000, which of the following conditions is implied?
- A. The value of claims is overstated.
- B. The standard deviation is larger than expected.
- C. The standard deviation is smaller than expected.
- D. The value of claims is understated.
Answer: C
NEW QUESTION 120
An internal auditor is using a spreadsheet application to review a cash flow forecast prepared by management.
Which of the following correctly identifies the type of evidence this information represents?
- A. Sufficient,analytical evidence of the cash flow position at a given point of time in the future.
- B. Competent,corroborative evidence of future working capital requirements.
- C. Sufficient,circumstantial evidence of the future solvency of the organization.
- D. Competent,documentary evidence of future cash flow changes within the organization.
Answer: D
NEW QUESTION 121
When conducting a preliminary survey, which of the following audit activities should an internal auditor complete first?
- A. Identify risks and controls intended to prevent associated losses.
- B. Determine relevant engagement objectives.
- C. Write detailed audit procedures.
- D. Identify client objectives, goals, and standards.
Answer: D
NEW QUESTION 122
In publicly held companies, management often requires the internal audit activity's involvement with quarterly financial statements that are made public and used internally. Which of the following is generally not a reason for such involvement?
- A. Management may be concerned about potential penalties that could occur if quarterly financial statements are misstated.
- B. Management may perceive that having quarterly financial information examined by the internal auditors enhances its value for internal decision making.
- C. Management may be concerned about its reputation in the financial markets.
- D. The Standards state that internal auditors should be involved with reviewing quarterly financial statements.
Answer: D
Explanation:
Section: Volume A
NEW QUESTION 123
During an account receivables audit, an internal auditor found a significant number of input errors resulting in a $500,000 balance understatement. Which of the following is the most important question the internal auditor should ask to develop an appropriate recommendation for this finding?
- A. Who?
- B. Why?
- C. When?
- D. How?
Answer: B
NEW QUESTION 124
A daily report which lists unsuccessful attempts to log on to a computer system is A.
- A. Compensating control.
- B. Detective control.
- C. Preventive control.
- D. Corrective control.
Answer: B
Explanation:
Section: Volume B
NEW QUESTION 125
According to the Standards, a review team must express an opinion on which of the following when performing an external assessment of an internal audit activity?
1. Conformance with the Standards and IIA Code of Ethics.
2. Effectiveness of continuous improvement activities.
3. Feedback from internal audit customers and other stakeholder groups.
4. Efficiency and effectiveness of the internal audit activity's administration processes.
- A. 2 and 4 only
- B. 1 only
- C. 3 only
- D. 1 and 2 only
Answer: B
NEW QUESTION 126
The results of an internal audit activity's (IAA) quality assurance and improvement program are favorable and an external assessment was completed within the last five years. Which of the following statements may the IAA use to describe its work?
- A. "Compliant with all domestic and international legal statutes, and certified quality assured for ten years."
- B. "Completed with the advance certification of the External Assessors Association for Auditing Review."
- C. "Conforms with the International Standards for the Professional Practice of Internal Auditing."
- D. "Certified 100% accuracy, per the International Standards of External Assessment."
Answer: C
NEW QUESTION 127
According to IIA guidance,which of the following are considerations of due professional
care when an internal auditor conducts a formal consulting engagement?
1.The complexity of the work required.
2.The needs and expectations of the client.
3.The potential value of the engagement compared to the effort.
4.Information regarding assumptions and procedures to be employed.
- A. 1,2,3,and 4
- B. 2 and 3 only
- C. 1,2,and 3 only
- D. 1 and 4 only
Answer: C
NEW QUESTION 128
Which of the following lists the audit activities in the order in which they would generally be completed during a preliminary survey?
I. Write detailed audit procedures.
II. Identify client objectives, goals, and standards.
III. Identify risks and controls intended to prevent associated losses.
IV. Determine relevant engagement objectives.
- A. II, IV, I, III.
- B. III, IV, II, I.
- C. II, I, IV, III.
- D. II, III, IV, I.
Answer: D
NEW QUESTION 129
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