Deck 21: Internal, Operational, and

Question 1

The working papers represent the primary support for the auditor's report in both a financial statement audit and an operational audit.

Answer 1

True

Question 2

GASAS, like GAAS, requires auditors to consider the risk of fraud.

Answer 2

True

Question 3

Internal auditor's primary reporting responsibility is to third parties.

Answer 3

False

Question 4

In an operational audit, the auditor's findings basically result in constructive criticism.

Question 5

The IIA's concept of independence is the same as the AICPA's concept of independence.

Question 6

Operational auditing focuses on the future.

Question 7

One responsibility of the director of internal auditing is to coordinate the work of internal auditors with the work of the external auditor.

Question 8

The analysis of an operational audit involves the study and measurement of actual performance in relation to some criteria.

Question 9

Operational auditing is primarily concerned with a company's financial operations.

Question 10

There are more phases in an operational audit than in a financial statement audit.

Question 11

Like financial statement audits, an operational audit ends with a report on the findings.

Question 12

During an operational audit, the auditor makes an extensive search for facts pertaining to the problems identified in the audit during the preliminary study.

Question 13

Internal auditing is part of the monitoring function of internal control that examines and evaluates the adequacy and effectiveness of the accounting system.

Question 14

Internal audit has a reporting responsibility directly to the board of directors or its audit committee.

Question 15

In operational audits the auditor does not need to be knowledgeable of the industry in which the entity operates.

Question 16

The operational audit report is usually drafted by the manager of the audited unit.

Question 17

Like the AICPA Code of Professional Ethics, the IIA Code of Ethics is divided into both ethical principles and ethical rules.

Question 18

The audit is the most time consuming phase of an operational audit.

Question 19

Certified internal auditors are licensed by the states in which their firms are headquartered.

Question 20

Passage of the Foreign Corrupt Practices Act had a positive effect on the development of
internal auditing.

Question 21

If the operational audit report is long and detailed, the report may begin with an executive summary of the findings and recommendations.

Question 22

GAGAS include the AICPA generally accepted auditing standards for field work and reporting.

Question 23

The new IIA standards includes all of the following except:

A) attribute standards.
B) performance standards.
C) implementation standards.
D) quality control standards.
E) all of the above standards.

Question 24

Governmental auditing includes all audits made by government audit agencies and all audits of governmental organizations.

Question 25

Under the Single Audit Act, state and local governments and nonprofit organizations that receive $100,000 or more in federal financial assistance in any fiscal year, either directly from a federal agency or indirectly through another state or local government entity, are required to have a single annual audit.

Question 26

Federal financial assistance is broadly defined in the Single Audit Act as assistance provided by a federal government agency in the form of grants, contracts, loans, loan guarantees, property, cooperative agreements, interest subsidies, insurance, or direct appropriations, and direct federal cash assistance to individuals.

Question 27

As indicated in the second additional reporting standard, GAGAS requires auditors to report deficiencies in internal control that they consider to be reportable conditions.

Question 28

Which of the following items is a misquote from the IIA's definition of internal auditing?

A) "...an independent, objective staff function..."
B) "designed to add value…"
C) "and improve an organization's operations."
D) "It helps an organization accomplish its objectives…"
E) "by bringing a systematic, disciplined approach…"

Question 29

The final phase of an operational audit is for the auditor to report the findings to management.

Question 30

GAGAS prescribe additional internal control standards for financial statement audits.

Question 31

The Single Audit Act reduces the need for federal agencies to conduct, and for recipients of federal financial assistance to undergo, multiple separate financial and compliance audits.

Question 32

The standards for the professional practice of internal auditing include all of the following except:

A) professional proficiency.
B) performance of audit work.
C) management of the accounting department.
D) independence.
E) scope of work.

Question 33

Which of the following is not a correct interpretation of the definition of internal auditing provided by the IIA?

A) Employees of the organization may conduct internal auditing activities.
B) Internal auditing is a line activity within the organization.
C) All phases of the entity's operations fall within the scope of internal auditing.
D) The auditor's judgment has value when it is free of bias.
E) Internal auditing exists to aid or benefit the entire organization.

Question 34

The U.S. Governmental Accounting Office (GAO) establishes audit standards for audits of government organizations, programs, activities, functions, and of government funds received by nongovernment organizations.

Question 35

Audits of governmental organizations are premised largely on the concept that the officials and employees who manage public funds are accountable to the public.

Question 36

When a member of the AICPA performs an operational audit, the primary source of standards are the SASs.

Question 37

To become a certified internal auditor (CIA), an individual must meet all of the following except:

A) pass the examination.
B) have a minimum of five years experience as an internal auditor.
C) have auditing experience in public accounting.
D) comply with IIA's practice standards and code of ethics.
E) meet continuing professional education requirements.

Question 38

The IIA Code of Ethics Rules of Conduct regarding integrity include all of the following except:

A) shall perform their work with honesty, diligence, and responsibility.
B) shall observe the law and make disclosures expected by the law and the profession.
C) shall not knowingly be a party to any illegal activity, or engage in acts that are discreditable to the profession of internal auditing or to the organization.
D) shall be licensed by a governmental agency.
E) shall respect and contribute to the legitimate and ethical objectives of the organization.

Question 39

All AICPA standards (SASs and SSAEs) that apply to financial related audits are also incorporated by reference into GAGAS.

Question 40

Based on their expertise and experience, independent public accountants are qualified to perform operational audits.

Question 41

Governmental financial related audits include determining all of the following except whether:

A) the entity's internal controls over financial reporting is suitably designed and implemented to achieve the control objectives.
B) the entity's internal controls over safeguarding assets is suitably designed
And implemented to achieve the control objectives.
C) the financial statements are presented in accordance with GAAP.
D) financial information is presented in accordance with established or stated criteria.
E) the entity has adhered to specific financial compliance requirements.

Question 42

A general standard that is unique to governmental audits is:

A) qualifications.
B) independence.
C) quality control.
D) due professional care.
E) planning.

Question 43

The GAO audit standards are recognized as:

A) GACAS.
B) GASS.
C) GAAS.
D) GASB.
E) GAGAS.

Question 44

The categories of generally accepted government auditing standards (GAGAS) that apply to financial audits are:

A) general and field work.
B) general, fieldwork, and reporting.
C) general standards only.
D) field work and reporting.
E) general and reporting.

Question 45

The essential parts of the definition of operational auditing do not include:

A) evaluating an organization's operations.
B) effectiveness, efficiency, and economy of operations.
C) recommendations for improvement.
D) systematic process.
E) reporting to stockholders.

Question 46

AICPA standards recognize an operational audit as a form of:

A) attestation services.
B) management consulting services.
C) accounting services.
D) audit services.
E) review services.

Question 47

Governmental program audits include determining all of the following except:

A) the causes of the ineffectiveness of the organization's programs, activities, or functions.
B) the effectiveness of the organization's programs, activities, or functions.
C) the extent to which the desired results or benefits established by the legislature or other authorizing body are being achieved.
D) whether the entity has complied with significant laws applicable to the program.
E) whether the entity has complied with significant regulations applicable to the program.

Question 48

Internal auditor independence would not be impaired if the auditor:

A) made management decisions relating to financial activities.
B) assumes operating responsibilities.
C) reports directly to the controller.
D) reports directly to the treasurer.
E) makes recommendations based on audit findings.

Question 49

The phases of an operational audit include all of the following except:

A) plan audit.
B) perform follow-up.
C) report findings to management.
D) accept client.
E) perform audit.

Question 50

A report on an operational audit should include all of the following except:

A) a statement of the objectives and scope of the audit.
B) a summary of the findings.
C) recommendations for improvement.
D) comments of the auditee.
E) a detailed description of the work done in the audit.

Question 51

In the audit performance phase of an operational audit, the auditor relies primarily on:

A) tests of compliance and tests of balances.
B) confirming and vouching.
C) tests of transactions and tests of balances.
D) inquiring and observation.
E) tracing and vouching.

Question 52

The five additional field work standards included by GAGAS comprise all of the following except:

A) auditor communication.
B) audit follow-up.
C) noncompliance other than illegal acts.
D) working papers.
E) documentation of the assessment of detection risk for assertions significantly dependent on computerized information systems.

Question 53

Planning is especially critical in an operational audit due to this type of audit's:

A) complexity.
B) difficulty.
C) diversity.
D) critical perspective.
E) multiplicity.

Question 54

The most time consuming phase of an operational audit is the:

A) select auditee phase.
B) plan audit phase.
C) perform audit phase.
D) report findings phase.
E) report follow-up phase.

Question 55

Which of the following is normally documented in the working papers prepared during an operational audit?

A) the recommendations.
B) the work scheduled.
C) the expected results.
D) the final feedback.
E) the comments of the auditee.

Question 56

In selecting an auditee for operational auditing, an understanding of the potential auditees is obtained by all of the following except:

A) applying analytical procedures to quantify trends and unusual relationships.
B) reviewing background file data on each auditee.
C) touring the auditee's facilities to ascertain how it accomplishes its objectives.
D) interviewing the manager of the activity about specific problem areas.
E) conducting mini audit probes to confirm or clarify the auditor's understanding of potential problems.

Question 57

The U.S. GAO establishes audit standards for audits of all of the following except government:

A) programs.
B) activities.
C) functions.
D) funds received by government organizations.
E) organizations.

Question 58

Governmental economy and efficiency audits include determining all of the following except:

A) whether the entity is acquiring, protecting and using its resources economically and efficiently.
B) the causes of inefficiencies.
C) whether the entity has complied with laws and regulations concerning matters of economy and efficiency.
D) the effectiveness of the organization's programs, activities, or functions.
E) the causes of uneconomical practices.

Question 59

In the auditee selection phase of an operational audit, the main criterion for selection is:

A) ease of evaluating the area.
B) potential for improvement in the effectiveness, efficiency, and economy of operations.
C) ease of developing the audit plan.
D) expected cost of the examination.
E) the extent of resources controlled by the area.

Question 60

Copies of operational audit reports are ordinarily sent to who?

A) senior management and the audit committee.
B) senior management.
C) the auditee.
D) the audit committee.
E) the external auditor the audit committee.

Question 61

The general standards for the professional practice of internal auditing include the following:

-Internal auditors should maintain their technical competence through continuing education.
_____

A)Independence,
B)Professional Proficiency,
C)Scope of Work,
D)Performance of Audit Work, and
E)Management of the Internal Auditing Department.

Question 62

The general standards for the professional practice of internal auditing include the following:
A.Independence,
B.Professional Proficiency,
C.Scope of Work,
D.Performance of Audit Work, and
E.Management of the Internal Auditing Department.
REQUIRED: Using the appropriate code letter, indicate the standard to which each of the following specific standards pertain.
_____
Internal auditors should review the reliability and integrity of financial and operating information and the means used to identify, measure, classify, and report such information.
_____

Question 63

The general standards for the professional practice of internal auditing include the following:
A.Independence,
B.Professional Proficiency,
C.Scope of Work,
D.Performance of Audit Work, and
E.Management of the Internal Auditing Department.
REQUIRED: Using the appropriate code letter, indicate the standard to which each of the following specific standards pertain.
_____
The organizational status of the internal auditing department should be sufficient to permit the accomplishment of its audit responsibilities.
_____

Question 64

A federal agency that has the responsibility for implementing the requirements for single audits for a particular state or local government is a(n):

A) conscious agency.
B) cognizant agency.
C) sentient agency.
D) perceptive agency.
E) observant agency.

Question 65

The general standards for the professional practice of internal auditing include the following:
A.Independence,
B.Professional Proficiency,
C.Scope of Work,
D.Performance of Audit Work, and
E.Management of the Internal Auditing Department.
REQUIRED: Using the appropriate code letter, indicate the standard to which each of the following specific standards pertain.
_____
The director of internal auditing should have a statement of purpose, authority, and responsibility for the internal auditing department.
_____

Question 66

The general standards for the professional practice of internal auditing include the following:
A.Independence,
B.Professional Proficiency,
C.Scope of Work,
D.Performance of Audit Work, and
E.Management of the Internal Auditing Department.
REQUIRED: Using the appropriate code letter, indicate the standard to which each of the following specific standards pertain.
_____
The director of internal auditing should provide written policies and procedures to guide the audit staff.
_____

Question 67

The general standards for the professional practice of internal auditing include the following:
A.Independence,
B.Professional Proficiency,
C.Scope of Work,
D.Performance of Audit Work, and
E.Management of the Internal Auditing Department.
REQUIRED: Using the appropriate code letter, indicate the standard to which each of the following specific standards pertain.
_____
Internal auditors should review operations or programs to ascertain whether results are consistent with established objectives and goals and whether the operations or programs are being carried out as planned.
_____

Question 68

The general standards for the professional practice of internal auditing include the following:
A.Independence,
B.Professional Proficiency,
C.Scope of Work,
D.Performance of Audit Work, and
E.Management of the Internal Auditing Department.
REQUIRED: Using the appropriate code letter, indicate the standard to which each of the following specific standards pertain.
_____
The director of internal auditing should coordinate internal and external audit efforts.
_____

Question 69

The general standards for the professional practice of internal auditing include the following:
A.Independence,
B.Professional Proficiency,
C.Scope of Work,
D.Performance of Audit Work, and
E.Management of the Internal Auditing Department.
REQUIRED: Using the appropriate code letter, indicate the standard to which each of the following specific standards pertain.
_____
Internal auditors should be skilled in dealing with people and in communicating effectively.
_____

Question 70

The auditor's report(s) under the Single Audit Act includes all of the following except a(n):

A) opinion on the financial statements.
B) report on internal control.
C) report on compliance.
D) report on audit follow-up.
E) schedule of findings and questioned costs.

Question 71

The general standards for the professional practice of internal auditing include the following:
A.Independence,
B.Professional Proficiency,
C.Scope of Work,
D.Performance of Audit Work, and
E.Management of the Internal Auditing Department.
REQUIRED: Using the appropriate code letter, indicate the standard to which each of the following specific standards pertain.
_____
Internal auditors should plan each audit.
_____

Question 72

The general standards for the professional practice of internal auditing include the following:
A.Independence,
B.Professional Proficiency,
C.Scope of Work,
D.Performance of Audit Work, and
E.Management of the Internal Auditing Department.
REQUIRED: Using the appropriate code letter, indicate the standard to which each of the following specific standards pertain.
_____
Internal auditors should possess the knowledge, skills, and disciplines essential to the performance of internal audits.
_____

Question 73

GAGAS requires auditors to report deficiencies in internal control that they consider to be reportable conditions. Examples of such reportable conditions include all of the following except:

A) absence of appropriate segregation of duties consistent with appropriate control objectives.
B) evidence of failure to safeguard assets from loss, damage, or misappropriation.
C) absence of a sufficient level of control consciousness within the organization.
D) failure to follow-up and correct previously identified deficiencies in internal control.
E) absence of an efficient use of audit resources.

Question 74

The five additional reporting standards included by GAGAS comprise all of the following except:

A) compliance with GAGAS.
B) compliance with internal controls.
C) report distribution.
D) privileged and confidential operations.
E) compliance with laws and regulations.

Question 75

In order to provide sufficient evidence to support an opinion on compliance, the auditor should set the scope of the audit to address specific requirements such as all of the following, except:

A) types of procedures allowed or not allowed.
B) eligibility.
C) matching.
D) reporting.
E) special tests and provisions.

Question 76

The general standards for the professional practice of internal auditing include the following:
A.Independence,
B.Professional Proficiency,
C.Scope of Work,
D.Performance of Audit Work, and
E.Management of the Internal Auditing Department.
REQUIRED: Using the appropriate code letter, indicate the standard to which each of the following specific standards pertain.
_____
Internal auditors should report the results of their audit work.
_____

Question 77

Internal auditors are expected to apply and uphold the following principles except:

A) integrity.
B) objectivity.
C) independence.
D) confidentiality.
E) competency.

Question 78

Which of the following is not a stated objective of the Single Audit Act?

A) improve the financial management of state and local governments and nonprofit organizations with respect to federal financial assistance programs.
B) establish uniform requirements for audits of federal financial assistance provided to state and local governments.
C) improve and coordinate the practice monitoring programs of auditors who perform government audits.
D) promote the efficient and effective use of audit resources.
E) ensure that federal departments and agencies, to the maximum extent practicable, rely on and use audit work done pursuant to the requirements of the Single Audit Act.

Question 79

The general standards for the professional practice of internal auditing include the following:
A.Independence,
B.Professional Proficiency,
C.Scope of Work,
D.Performance of Audit Work, and
E.Management of the Internal Auditing Department.
REQUIRED: Using the appropriate code letter, indicate the standard to which each of the following specific standards pertain.
_____
Internal auditors should collect, analyze, interpret, and document information to support audit results.
_____

Question 80

The general standards for the professional practice of internal auditing include the following:
A.Independence,
B.Professional Proficiency,
C.Scope of Work,
D.Performance of Audit Work, and
E.Management of the Internal Auditing Department.
REQUIRED: Using the appropriate code letter, indicate the standard to which each of the following specific standards pertain.
_____
The internal auditing department should possess or should obtain the knowledge, skills, and disciplines needed to carry out its audit responsibilities.
_____