Essentials of Internal Auditing

NEW QUESTION: 1 During a payroll audit of a large organization, an auditor noted that the assistant personnel director is responsible for many aspects of the computerized payroll system, including adding new employees in the system; entering direct-deposit information for employees; approving and entering all payroll changes; and providing training for system users. After discussions with the director of personnel, the auditor concluded that the director was not comfortable dealing with information technology issues and felt obliged to support all actions taken by the assistant director. The auditor should: A. Recommend to the chief audit executive that a fraud investigation be started. B. Test a sample of payroll changes to ensure that they were approved by the assistant director before being processed. C. Continue to follow the engagement program because the engagement scope and objectives have already been discussed with management. D. Review the engagement program to ensure testing of direct deposits to employee bank accounts is adequately covered. Answer: D (LEAVE A REPLY) NEW QUESTION: 2 Which of the following internal control weaknesses would an auditor most likely detect while reviewing a flowchart that depicts the purchasing function of an organization? A. Purchasing policies have not been updated. B. Payments to suppliers are made before goods are received. C. The organization is not taking advantage of quantity discounts available from its suppliers. D. Payments for goods received have not been authorized at the appropriate level. Answer: B (LEAVE A REPLY) NEW QUESTION: 3 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. Ensure that adequate edit and reasonableness checks are built into the automated system. B. Limit access to the data table to management and line supervisors who have the authority to determine pay rates. 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. Require that all pay changes be signed by the employee to verify that the change goes to a bona fide employee. Answer: C (LEAVE A REPLY) NEW QUESTION: 4 Which of the following measurements could an auditor use in an audit of the efficiency of a motor vehicle inspection facility? A. The average amount of fees collected per cashier. B. The ratio of cars rejected to total cars inspected. C. The number of cars inspected per inspection agent. D. The total number of cars approved. Answer: C (LEAVE A REPLY) NEW QUESTION: 5 An engagement manager is reviewing the results of sampling work performed by staff internal auditors. Which interim report statement should immediately give the engagement manager cause for concern about the nature and quality of the sampling procedure? A. The acceptable risk of assessing control risk too low is 10%, the tolerable deviation rate is 5%, the true, but unknown population rate is less than 5%, the achieved upper deviation limit is 4.8%. B. The acceptable risk of assessing control risk too low is 5%, the tolerable deviation rate is 5%, the expected population deviation rate is 1%, the confidence expressed is 95%. C. The acceptable risk of assessing control risk too low is 5%, the tolerable deviation rate is 5%, the expected population deviation rate is 5%, the sample size is 1580. D. The acceptable risk of assessing control risk too low is 10%, the tolerable deviation rate is 5%, the expected population deviation rate is 1%, sample size is 80 out of a large population. Answer: (SHOW ANSWER) NEW QUESTION: 6 Which of the following controls is not appropriate for sales in a manufacturing organization? A. Goods returned are inspected for damage by the receiving department for proper disposition. B. Goods shipped are matched with valid customer orders. C. Customers' orders are recorded promptly. D. Sales department approval is required for credit sales transactions. Answer: (SHOW ANSWER) NEW QUESTION: 7 Which of the following would be the best example of a monitoring control for a chain of restaurants? A. Each restaurant manager reconciles the cash received with the food orders recorded on the computer. B. Corporate management prepares a detailed analysis of gross margin per restaurant and investigates those showing a significantly lower gross margin. C. All food orders must be entered through the computer, and there is segregation of duties between the food servers and the cooks. D. Proof of bank deposit is transmitted to corporate headquarters on a daily basis. Answer: B (LEAVE A REPLY) NEW QUESTION: 8 An internal auditor audited a department store's cash function. Which of the following actions would indicate a lack of due professional care by the auditor? A. The audit report included a well-supported recommendation for a reduction in staff even though such a reduction might adversely impact morale. B. The auditor informed appropriate authorities within the organization about suspected wrongdoing but did not inform external authorities. C. Based on a well-designed system of internal controls over the cash function, the audit report assured senior management that no irregularities existed. D. A flowchart of the entire cash function was developed but only samples of transactions were tested. Answer: C (LEAVE A REPLY) NEW QUESTION: 9 Which of the following is an example of a transaction-level control? A. Reconciliations of primary accounts. B. Tone at the top. C. Inventory counts. D. Human resource policies. Answer: (SHOW ANSWER) NEW QUESTION: 10 A chief audit executive used risk assessment to prepare the audit work schedule. Which of the following would be the least appropriate reason to modify the schedule? A. Request for postponement since the audit would be too complicated. B. Budget constraints or expansions. C. Need for coordination of audit activities with the external auditors. D. Change in the relative risk of auditable activities during the year. Answer: A (LEAVE A REPLY) NEW QUESTION: 11 A company produces a product that consists of materials X, Y, and. The product is mixed so that: The quantity of material X used is one-third more than that of material Y. The quantity of material Y used is one-fourth less than that of material Z. If the company used 24, 000 units of material Z during a period, what is a reasonable estimate of the amount of material X used? A. 24, 000 B. 18, 000 C. 8, 000 D. 32, 000 Answer: A (LEAVE A REPLY) NEW QUESTION: 12 Which of the following is an activity that an internal auditor must not perform? A. Assess the risk of being fined for ineffective anti-money laundering practices. B. Survey employees for their understanding of anti-money laundering practices. C. Establish and provide continuing assurance on an anti-money laundering program for new hires. D. Provide assurance for the effectiveness of anti-money laundering training. Answer: C (LEAVE A REPLY)