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IIA-CIA-PART2 PDF Demo

Author: Monika Bergmann
by Monika Bergmann
Posted: Dec 01, 2016

Question: 1

An auditor, assigned to review a complex computer system that had undergone a few system changes, obtained the prior flowchart used. Which of the following would be the most efficient way to document the changes?

A. Create a new flowchart reflecting the system changes.

B. Prepare a detailed narrative instead of a flowchart to describe the updated system.

C. Add a detailed narrative to the prior flowchart to describe the changes to the system.

D. Make the necessary adjustments on a copy of the prior flowchart and save as a new version.

Answer: D

Question: 2

When interrogating an individual who is suspected of fraud, it is appropriate to

A. Tell the individual that any information disclosed in the interrogation will not be disclosed outside of the company.

B. Start the interview with questions to which the interviewer already knows the answer.

C. Discontinue questioning once the individual has confessed to the fraud.

D. Prepare a list of questions prior to the interrogation and strictly adhere to the list.

Answer: B

Question: 3

Which of the following is typically not a reason for committing financial statement fraud?

A. To dispel negative market perception.

B. To disguise a duplicate payment to a vendor.

C. To obtain more favorable terms on financing.

D. To receive performance related bonuses.

Answer: B

Question: 4

A company regularly invests excess short-term cash in trading securities. A reliable test of the valuation of those securities would be a

A. Recalculation of investment carrying value using the equity method.

B. Comparison of cost data with current market quotations.

C. Confirmation of securities held by the broker.

D. Calculation of premium or discount amortization.

Answer: B

Question: 5

Which of the following sampling plans should an internal auditor use to estimate the number of units in a certain class of inventory without counting each item?

A. Attributes sampling.

B. Discovery sampling.

C. Variables sampling.

D. Stop or go sampling.

Answer: C

Question: 6

Which of the following is an example of sampling risk?

A. Overlooking material errors.

B. Failing to analyze results properly.

C. Checking invoices that are not representative of the population.

D. Using audit procedures that are not appropriate for the given audit objective.

Answer: C

Question: 7

Which of the following would constitute a violation of the IIA Code of Ethics?

A. An internal auditor, who has recently joined the organization, has accepted an assignment to audit the electronics manufacturing division. The auditor previously served as senior auditor for the external audit of that division and has audited many electronics companies during the past two years.

B. An internal auditor has accepted an assignment to audit the warehousing function six months from now. The auditor has no expertise in that area but has signed up for courses in warehousing that will be completed before the assignment begins.

C. An internal auditor has no ambitions for promotion and has not engaged in training or other professional development activities during the last three years. The auditor's performance assessments indicate consistent quality of work.

D. An internal auditor discovered an internal financial fraud during the year, and the financial statements were adjusted to properly reflect the loss associated with the fraud. The auditor discussed the fraud with the external auditor during the external auditor's review of the working papers detailing the incident.

Answer: C

Question: 8

A staff auditor, nearly finished with an audit engagement, discovers that the director of marketing has a gambling habit. The gambling issue is not directly related to the existing engagement and there is pressure to complete the current engagement. The auditor notes the problem and forwards the information to the chief audit executive but performs no further followup. The auditor's actions would

I. Be in violation of the IIA Code of Ethics for withholding meaningful information.

II. Be in violation of the Standards because the auditor did not properly follow up on a red flag that might indicate the existence of fraud.

III. Not be in violation of either the IIA Code of Ethics or Standards.

A. I only.

B. II only.

C. III only.

D. I and II only.

Answer: C

Question: 9

A code of ethics within the internal auditing profession is necessary in order to

A. Reduce the likelihood that members of the profession will be sued for substandard work.

B. Ensure that all members of the profession perform at approximately the same level of competence.

C. Provide guidance to internal auditors in their service to others.

D. Require members of the profession to exhibit loyalty in all matters pertaining to the affairs of their organization.

Answer: C

Question: 10

An investment portfolio manager has the authority to use financial derivatives to hedge transactions but is not supposed to take speculative positions. However, the manager launches a scheme which includes

  1. taking a position larger than required by the hedge;
  2. putting the speculative gains in a suspense account; and
  3. transferring the funds to a nonexistent broker and from there to a personal account. Which of the following audit procedures would be least effective in detecting this fraud?

A. Select a sample of individual trades and examine to determine whether the trades violate the authorization limit for the manager.

B. Select a sample of individual trades and determine the exact matching of the hedge. Schedule and investigate all differences.

C. Select a sample of all debits to the suspense account and examine their disposition.

D. Select a sample of fund transfers to brokers and determine if the brokers are on the authorized list for company transactions.

Answer: A

Question: 11

Confirmation would be most effective in addressing the existence assertion for

A. The addition of a milling machine to a machine shop.

B. Sales of merchandise during the regular course of business.

C. Inventory held on consignment.

D. The granting of a patent for a special process developed by the organization.

Answer: C

Question: 12

Which of the following examples of audit evidence is the most persuasive?

A. Real estate deeds, which were properly recorded with a government agency.

B. Canceled checks written by the treasurer and returned from a bank.

C. Time cards for employees, which are stored by a manager.

D. Vendor invoices filed by the accounting department.

Answer: A

Question: 13

During an operational audit of a chain of pizza delivery stores, an auditor determined that cold pizzas were causing customer dissatisfaction. A review of oven calibration records for the last six months revealed that adjustments were made on over 40 percent of the ovens. Based on this, the auditor

A. Has enough evidence to conclude that improperly functioning ovens are the cause.

B. Needs to conduct further inquiries and reviews to determine the impact of the oven variations on the pizza temperature.

C. Has enough evidence to recommend the replacement of some of the ovens.

D. Must search for another cause since approximately 60 percent of the ovens did not require adjustment.

Answer: B

Question: 14

An auditor decides to vouch a sample of ledger entries back to their original documentation. In terms of whether all transactions had been recorded, this test would be

A. Relevant to the completeness objective.

B. Irrelevant to the completeness objective.

C. A more timely test of completeness than evidence from interviews.

D. A more biased test of completeness than evidence from interviews.

Answer: B

Question: 15

An internal auditor for a financial institution has just completed an audit of loan processing. Of the 81 loans approved by the loan committee, the auditor found seven loans which exceeded the approved amount. Which of the following actions would be inappropriate on the part of the auditor?

A. Examine the seven loans to determine if there is a pattern. Summarize amounts and include in the engagement final communication.

B. Report the amounts to the loan committee and leave it up to them to correct. Take no further followup action at this time and do not include the items in the engagement final communication.

C. Follow up with the appropriate vice president and include the vice president's acknowledgment of the situation in the engagement final communication.

D. Determine the amount of the differences and make an assessment as to whether the dollar differences are material. If the amounts are not material, not in violation of government regulations, and can be rationally explained, omit the observation from the engagement final communication.

Answer: B

Question: 16

The following is an excerpt from an audit engagement workpaper A Company Accounts Receivable Date Objective To determine if the computer system is correctly recording all accounts receivable transactions. Procedures Judgmental selection of a sample of all accounts receivable balances greater than $50,000 for positive confirmation of balances. Conclusion Based on the results of testing wherein all but three confirmations were returned, the accounts receivable balance is fairly presented in all material respects. Which of the following is true regarding the workpaper?

A. It is not appropriate to judgmentally select a sample when testing accounts receivable.

B. A conclusion should be reached only for the results of overall testing, not for individual procedures.

C. The audit procedures used are not consistent with the audit objective.

D. The format of the workpaper does not conform to the standard format for workpapers.

Answer: C

Question: 17

The efficiency of internal audit operations is best enhanced if workpaper standards

A. Permit the extent of documentation to vary according to engagement objectives.

B. Require supervisors to initial and date each workpaper that they review.

C. Allow access to workpapers by external parties if approved by senior management or the audit committee.

D. Mandate the workpaper retention period.

Answer: A

Question: 18

Which of the following represents appropriate evidence of supervisory review of engagement workpapers?

I. A supervisor's initials on each workpaper.

II. An engagement workpaper review checklist.

III. A memorandum specifying the nature, extent, and results of the supervisory review of workpapers.

IV. Performance appraisals that assess the quality of workpapers prepared by auditors.

A. II and IV only.

B. I, II, and III only.

C. I, III, and IV only.

D. I, II, III, and IV.

Answer: B

Question: 19

Which of the following conclusions would be appropriate for a beginning auditor performing an audit of a payroll department?

A. Employee taxes have been deducted at the correct rates, and the taxes have been forwarded to the appropriate government agency.

B. Although there is insufficient segregation of duties, the impact is mitigated by compensating controls.

C. The payroll computer system should be replaced.

D. The payroll department staff has the appropriate level of skills.

Answer: A

Question: 20

A governmental auditor was assigned to determine reasons why the students in one region scored significantly higher on education evaluation tests than did the students in another region. Previous research showed that there is a direct correlation between public financial support and student results. Which of the following is most likely to explain the difference in the regional results?

A. The more successful region spends 30 percent more money on education than does the other region.

B. A higher percentage of the general tax fund is spent on education in the more successful region than in the other region.

C. The more successful region spends more money per student on education than does the other region.

D. The more successful region has increased educational spending by an average of 10 percent each year for the last three years, whereas the other region's increase averaged only three percent.

Answer: C

Question: 21

Which of the following is not relevant when developing recommendations for inclusion in audit reports?

A. Feasibility.

B. Cost of implementation.

C. Underlying causes.

D. Timing of followup.

Answer: D

Question: 22

Recommendations should be included in the audit report in order to

A. Provide management with options for addressing audit findings.

B. Ensure that audit findings are resolved in the manner suggested by the auditor.

C. Minimize the amount of time required to correct audit findings.

D. Ensure that audit findings are addressed by management.

Answer: A

Question: 23

A chief audit executive has noticed that staff auditors are presenting more oral reports to supplement written reports. The best reason for the increased use of oral reports is that they

A. Reduce the amount of testing required to support audit findings.

B. Can be delivered in an informal manner without preparation.

C. Can be prepared using a flexible format and reduce the information included in the written report.

D. Permit auditors to counter arguments and provide additional information that the audience may require.

Answer: D

Question: 24

Which of the following best defines an audit opinion?

A. A summary of the significant audit observations and recommendations.

B. An auditor's evaluation of the effects of the observations and recommendations on the activities reviewed.

C. A conclusion which must be included in the audit report.

D. A recommendation for corrective action.

Answer: B

Question: 25

According to the International Professional Practices Framework, which of the following statements is correct regarding the communication of audit results?

I. Summary reports may be issued separately from or in conjunction with the final report.

II. Interim reports may be written or oral.

III. Detailed reports should always be issued to the audit committee.

IV. Interim reports should be used to communicate information which requires immediate attention.

A. I and III only.

B. II and IV only.

C. I, II, and IV only.

D. I, II, III, and IV.

Answer: C

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Author: Monika Bergmann

Monika Bergmann

Member since: Oct 13, 2016
Published articles: 44

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