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NEW QUESTION # 141
A manufacturing line supervisor joins the internal audit activity for a two-year rotational job assignment and is assigned to an accounts receivable audit. With regard to this assignment, which of the following should be the primary concern of the audit manager?
- A. Organizational independence.
- B. Individual objectivity.
- C. Due professional care.
- D. Individual independence.
Answer: C
NEW QUESTION # 142
An organization has implemented a software system that requires a supervisor to approve transactions that would cause treasury dealers to exceed their authorized limit. This is an example of which of the following types of controls?
- A. Detective controls.
- B. Soft controls.
- C. Preventive controls.
- D. Directive controls.
Answer: C
NEW QUESTION # 143
An auditor in charge was reviewing the workpapers submitted by a newly hired internal auditor. She noted that the new auditor's analytical work did not include any rating or quantification of the risk assessment results, and she returned the workpapers for correction. Which section of the workpapers will the new auditor need to modify?
- A. Condition section.
- B. Effect section.
- C. Cause section.
- D. Criteria section.
Answer: B
NEW QUESTION # 144
Which of the following is an example of a risk management avoidance response?
- A. Recalling a product.
- B. Exiting a marketplace.
- C. Outsourcing production.
- D. Obtaining product insurance.
Answer: B
NEW QUESTION # 145
According to COSO, which of the following is not considered one of the components of an organization's internal environment?
- A. Knowledge and skills needed to perform activities.
- B. Authority and responsibility to resolve issues.
- C. Framework to plan, execute and monitor activities.
- D. Integrated responses to multiple risks.
Answer: D
NEW QUESTION # 146
A new internal audit activity is creating its first charter. According to IIA guidance, which of the following objectives would be appropriate for inclusion in the charter?
- A. Continuously monitor the organization's overall risk activities in relation to its risk appetite.
- B. Evaluate the adequacy and effectiveness of the organization's governance activities.
- C. Assist management in implementing recommended control improvements.
- D. Oversee the establishment and administration of an effective risk management program.
Answer: D
NEW QUESTION # 147
Which of the following would be considered a preventive control?
- A. A software scan of financial records for irregularities.
- B. A password lock on a server.
- C. A library control log.
- D. A review of exception reports.
Answer: B
NEW QUESTION # 148
According to IIA guidance, which of the following are macro-level audit activities performed for an assurance engagement of the purchasing department?
1. Obtain and review all purchasing-related audit reports issued within the past year.
2. Meet with the quality assurance group to discuss its previous reports of any purchasing-related findings.
3. Review a memo written by the purchasing manager that outlines ongoing problems with the purchasing software.
4. Request a copy of the report from a purchasing audit conducted last year by an external service provider.
- A. 1 and 3.
- B. 1 and 2.
- C. 2 and 4.
- D. 3 and 4.
Answer: B
NEW QUESTION # 149
The chief audit executive (CAE) of a mid-sized pharmaceutical organization has operational responsibility for the regulatory compliance function. The auditcommittee requests an assessment of regulatory compliance.
According to IIA guidance, which of the following is the CAE's best course of action?
- A. Have a proficient internal audit staff member perform the assessment and disclose the impairment in the audit report and to the board.
- B. Have a proficient internal audit staff member perform the audit and report the results of the assessment directly to senior management and the board.
- C. Contract with a third-party entity or external auditor to complete the assessment and report the results to senior management and the board.
- D. Have a regulatory compliance staff member perform a self-assessment, to be reviewed by a proficient internal auditor.
Answer: C
NEW QUESTION # 150
A former line supervisor from the Financial Services Department has completed six months of a two-year development opportunity with the internal audit activity (IAA). She is assigned to a team that will audit the organization's payroll function, which is managed by the Human Resources Department. Which of the following statements is most relevant regarding her independence and objectivity with respect to the payroll audit?
- A. She may participate for training purposes, to build her knowledge of the IAA.
- B. She may participate, but only after she has completed one year with the IAA.
- C. She may participate, because she did not previously work in the Human Resources Department.
- D. She may participate, but she must be supervised by the auditor in charge.
Answer: C
NEW QUESTION # 151
A manufacturing organization discovers that the waste water released has failed to meet permitted limits.
Which control function will be least effective in correcting the issue?
- A. Diluting pollutants by flushing sinks and floor drains daily with large volumes of clean water.
- B. Performing a chemical analysis of the water, prior to discharge, for components specified in the permit.
- C. Establishing a preventive maintenance program for the pretreatment system.
- D. Posting signs that tell employees which substances may be disposed of via sinks and floor drains within the facility.
Answer: A
NEW QUESTION # 152
Which of the following types of fraud includes embezzlement?
- A. Bribery.
- B. Fraudulent statements.
- C. Corruption.
- D. Misappropriation of assets.
Answer: D
NEW QUESTION # 153
Which of the following is a second line of defense in effective risk management and control?
- A. Credit department.
- B. Compliance department.
- C. Internal audit department.
- D. Purchasing department.
Answer: B
NEW QUESTION # 154
Which of the following controls could an internal auditor reasonably conclude is effective by observing the physical controls of a large server room?
- A. Servers are secured individually to their racks by locks.
- B. Foam fire extinguishers are operable to protect against electrical fires.
- C. Adequate signs are in place to assist in locating safety equipment.
- D. Swipe card access is required to gain access to the server room.
Answer: C
NEW QUESTION # 155
After being terminated due to downsizing, an internal auditor finds a different job with an organization in the same industry. Which of the following actions would violate the IIA Code of Ethics?
- A. To determine audit priorities in the new job, the auditor uses the audit risk approach that the auditor's previous employer used, without receiving permission to do so.
- B. At the new organization, the auditor is asked to develop forms to implement probability-proportional-to-size sampling. Although unsure of how to perform this type of sampling, the auditor proceeds without asking for assistance.
- C. In preparing for an audit at the previous organization, the auditor had conducted a great deal of research on the Internet at home to identify best practices for the management of a treasury function. The auditor has retained much of the research and uses it to conduct an audit of the new employer's treasury function.
- D. In the first week at the new organization, the auditor discovers a high fraud risk surrounding the organization's database and suggests that the information technology department implement a new password system to prevent fraudulent actions before they occur.
Answer: B
NEW QUESTION # 156
Which of the following best describes the details that must be included in the quality assurance and improvement program (QAIP) report to senior management and the board?
- A. The number and types of people involved in the assessment, costs, and duration of the QAIP
- B. The scope and frequency of internal and external assessments as well as the qualifications and independence of the assessor.
- C. The scope and cost of the QAIP. frequency of internal and external assessments, and conclusions of the assessor.
- D. The scope, findings, risks, recommendations, and agreed-upon improvement actions.
Answer: D
NEW QUESTION # 157
Which of the following techniques would best assist an internal auditor in evaluating the efficiency of a wholesale grocery distributor`s process to fill and package orders for shipping?
- A. A program evaluation and review technique chart.
- B. A Bedford analysis of orders filled to average delivery times.
- C. Queuing theory to assess potential bottlenecks in the process.
- D. Decision trees rating actual performance against requirements.
Answer: C
NEW QUESTION # 158
A chief audit executive (CAE) is reviewing the internal audit activity's performance and is concerned that the average number of revisions to findings is steadily rising, making it increasingly difficult to trace the finding to the supporting evidence and workpapers. According to MA guidance, which of the following elements of the internal audit activity's quality assurance and improvement program would provide the CAE with the most helpful insight into the cause of this problem?
- A. The overall effectiveness of the internal audit activity's periodic self assessments.
- B. The adequacy of the day-to-day supervision and review process.
- C. The scope and frequency of external assessments.
- D. The type of audit productivity and performance statistics reported.
Answer: B
NEW QUESTION # 159
According to IIA guidance, which of the following is ultimately responsible for seeing that the internal control system of an organization's social responsibility program is effective?
- A. All employees.
- B. Internal audit activity.
- C. Board of directors.
- D. Senior management.
Answer: C
NEW QUESTION # 160
An internal auditor is reviewing the accounts receivable when she discovers account balances more than three years old. The auditor was previously supervising the area during this time, and she subsequently advises the chief audit executive (CAE) of a potential conflict.
Which of the following is the most appropriate course of action for the CAE to take?
- A. Replace the auditor with another audit staff member.
- B. Withdraw the audit team and outsource the financial audit of the division.
- C. Continue with the present auditor, as more than one year has passed.
- D. Work with the division's management to resolve the situation.
Answer: A
NEW QUESTION # 161
In which of the following scenarios would a customer service hotline receive a high volume of complaints regarding payments not being applied to customers' accounts?
- A. Invoices are not being mailed to customers.
- B. An employee is tampering with customer checks.
- C. The customer service department is not forwarding complaints to the accounts receivable department.
- D. Employees are submitting fraudulent expense reports.
Answer: B
NEW QUESTION # 162
Which of the following is the most effective strategy to manage the risk of foreign exchange losses due to sales to foreign customers?
- A. Hire a risk consultant.
- B. Maintain a large foreign currency balance.
- C. Insist that customers only pay in a stable currency.
- D. Implement a hedging strategy.
Answer: D
NEW QUESTION # 163
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