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NEW QUESTION 298
In a client satisfaction survey for an internal audit engagement, client management should be asked to assess which of the following factors?
I. Audit team's knowledge of the audited area.
II. Usefulness of the audit results.
III. Quality of management of the internal audit activity.
IV. Clarity of the scope and objectives of the audit engagement.
- A. I and II only
- B. I, III, and IV only
- C. I, II, and IV only
- D. II and IV only
Answer: C
NEW QUESTION 299
An audit of customer accounts receivable found that outstanding receivables as a percentage of revenue had increased significantly during the past two years. The increase was attributed to the extension of credit, at the urging of the marketing department, to a number of companies that were not credit worthy. Which of the following would be least useful in monitoring the disposition of this finding?
- A. Updates from the information technology division regarding implementation of a new accounts receivable system.
- B. Information from the credit and marketing personnel assigned the responsibility for reevaluating credit policies.
- C. Periodic updates from the controller regarding the status of corrective actions.
- D. Responses from the manager of accounts receivable regarding collection of outstanding receivables.
Answer: A
Explanation:
Section: Volume B
NEW QUESTION 300
An internal auditor provided the following statement about division A's performance during the month:
"Because supplies of raw material X were scarce, division A's profits declined by 15 percent." Which of the following can be validly concluded from the auditor's statement?
I. Division A's production level declined by 15 percent.
II. Division A could have sold more products than it produced.
III. Division A usually sells all of the products that it produces.
- A. I and II only
- B. III only
- C. I only
- D. II only
Answer: D
NEW QUESTION 301
In reviewing the appropriateness of the minimum quantity level of inventory established by a department, an auditor would be least likely to consider:
- A. Optimal order sizes determined by an economic order quantity model.
- B. Seasonal variations in forecasting inventory demand.
- C. Stockout costs, including lost customers.
- D. The potential for obsolescence of inventory items.
Answer: A
NEW QUESTION 302
Which of the following topics must the internal audit staff discuss with management during the exit conference?
1. Issues identified during the audit.
2. Evaluation criteria used to select controls for testing.
3. Staff who were interviewed during the audit.
4. The reporting process for the draft and final report.
- A. 2 and 4 only
- B. 1 and 3 only
- C. 2 and 3 only
- D. 1 and 4 only
Answer: D
NEW QUESTION 303
Which of the following is a detective control for managing the risk of fraud?
- A. Verification of currency exchange rates.
- B. Contractor non-disclosure agreements.
- C. Awareness of prior incidents of fraud.
- D. Receipts for employee expenses.
Answer: A
Explanation:
Section: Volume E
NEW QUESTION 304
A company's policy requires that all customers be treated in a fair and consistent manner. Which of the following audit procedures would provide the most persuasive evidence that the policy was followed?
- A. Compare the aging of outstanding receivables due from each customer.
- B. Compare the ratio of outstanding receivables to the authorized credit limit for each customer.
- C. Compare the sales discounts offered to each customer.
- D. Compare credit reports with annual sales for a sample of customers.
Answer: C
Explanation:
Section: Volume A
Explanation
NEW QUESTION 305
Which of the following is true of engagement recommendations?
I.Specific suggestions for implementation must be included.
II.
The internal auditor's observations and conclusions may serve as the basis.
III.
Actions to correct existing conditions or improve operations may be included.
IV.
Approaches to correcting or enhancing performance may be suggested.
- A. III only.
- B. I, III, and IV only.
- C. II, III, and IV only.
- D. I only.
Answer: C
NEW QUESTION 306
Which of the following statements is false regarding roles and responsibilities pertaining to risk management and control?
- A. Operating managers are responsible for assessing risks and controls in their departments.
- B. The chief audit executive is responsible for overseeing the evaluation risk management and control processes.
- C. Internal auditors provide assurance about risk management and control process effectiveness.
- D. Senior management is charged with overseeing the establishment risk management and control processes.
Answer: B
NEW QUESTION 307
Which of the following topics must the internal audit staff discuss with management during the exit conference?
1. Issues identified during the audit.
2. Evaluation criteria used to select controls for testing.
3. Staff who were interviewed during the audit.
4. The reporting process for the draft and final report.
- A. 2 and 4 only
- B. 1 and 3 only
- C. 2 and 3 only
- D. 1 and 4 only
Answer: D
Explanation:
Section: Volume D
NEW QUESTION 308
According to IIA guidance, which of the following individuals should receive the final audit report on a compliance engagement for the organization's cash disbursements process?
- A. The accounts payable supervisor, controller, and treasurer.
- B. The accounts payable supervisor, accounts payable manager, and controller.
- C. The accounts payable manager, chief financial officer, and audit committee.
- D. The accounts payable manager, purchasing manager, and receiving manager.
Answer: B
NEW QUESTION 309
After completing a net present value (NPV) calculation on a proposed project, an analyst explores the change in NPV with changes in the interest rate. This additional analysis is referred to as:
- A. simul-ation.
- B. Decision analysis.
- C. Variance analysis.
- D. Sensitivity analysis.
Answer: D
NEW QUESTION 310
Given the scarcity of internal audit resources, a chief audit executive (CAE) decides not to schedule a follow-up of audit recommendations when developing engagement work schedules. Why does the CAE's decision violate the Standards?
- A. When resources are scarce, the follow-up can be incorporated into the next engagement.
- B. Follow-up actions should take priority over new engagements in scheduling.
- C. Lack of resources is not a sufficient reason to forgo a follow-up.
- D. It is not the CAE's responsibility to establish a process for a follow-up.
Answer: C
NEW QUESTION 311
Cross-referencing individual payroll time cards to personnel department records and reports would allow an internal auditor to determine whether:
- A. Personnel department records agree with payroll accounting records.
- B. Individuals were paid at the proper rates.
- C. Individuals were paid only for time worked.
- D. Individuals are bona fide employees.
Answer: D
NEW QUESTION 312
During a fraud interview, it was discovered that unquestioned authority enabled a vice president to steal funds from the organization. Which of the following best describes this condition?
- A. Scheme.
- B. Opportunity.
- C. Rationalization.
- D. Pressure.
Answer: B
Explanation:
Section: Volume E
NEW QUESTION 313
An internal control questionnaire would be most appropriate in which of the following situations?
- A. Testing controls in decentralized offices.
- B. Testing controls in areas with high control failure rates.
- C. Testing controls in high risk areas.
- D. Testing controls where operating procedures vary.
Answer: A
Explanation:
Section: Volume E
NEW QUESTION 314
An internal auditor determines that certain information from the engagement results is not appropriate for disclosure to all report recipients because it is privileged. In this situation, which of the following actions would be most appropriate?
- A. Exclude the results from the report and verbally report the conditions to senior management and the board.
- B. Disclose the information in a separate report.
- C. Distribute the reports through the use of blind copies.
- D. Distribute the information in a confidential report to the board only
Answer: B
NEW QUESTION 315
According to IIA guidance, which of the following should be considered when creating policies and procedures for the internal audit activity (IAA)?
- A. Number of auditors, complexity of audit activities, and structure of the IA
- B. Number of auditors, structure of the IAA, and audit staff skills and competencies.
- C. Complexity of audit activities, structure of the IAA, and audit staff skills and competencies.
- D. Number of auditors, complexity of audit activities, and audit staff skills and competencies.
Answer: A
NEW QUESTION 316
Which of the following types of contracts would provide the least incentive for a contractor to achieve economy and efficiency?
- A. Indefinite delivery contract.
- B. Lump-sum contract.
- C. Unit-price contract.
- D. Cost-plus contract.
Answer: D
NEW QUESTION 317
An internal auditor compared the number of human resources professionals per employee withindustry standards. This comparison would assist the auditor in evaluating which of the following areas?
- A. Current level of performance of the human resources department.
- B. Sufficiency of controls over payroll rate increases.
- C. Degree of compliance with human resources policies.
- D. Adequacy of controls over hiring new employees.
Answer: A
NEW QUESTION 318
Which of the following is the correct ratio to use in calculating the dollar value of the population if the auditor is using ratio estimation?
Number of Items Audited Value Carrying Amount Sample
$500,000 $480,000 Population 3,000 $5,000,000
- A. 0.10
- B. 0.96
- C. 10.00
- D. 1.04
Answer: D
NEW QUESTION 319
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