Question 1

The Institute of Internal Auditors Practice Standards regarding attributes include four categories of guidance that encompass both financial and operational auditing.List these categories of the Attribute Standards.

Accepted Answer

The answer of The Institute of Internal Auditors Practice Standards...

Question 2

A major difficulty in performance auditing is deciding on specific criteria for evaluating whether efficiency and effectiveness have occurred.Discuss two other sources of criteria that the operational auditor can use.

Accepted Answer

The answer of A major difficulty in performance auditing is...

Question 3

Which one of the following is NOT one of the three phases in a performance audit?
A) planning
B) training and supervising employees
C) evidence accumulation and evaluation
D) reporting and follow-up

Accepted Answer

Training and supervising employees is not one of the three phases of a performance audit. The three phases are planning, evidence accumulation and evaluation, and reporting and follow-up.

Question 4

To help them remain independent of the operations they audit, internal auditors should report directly to the chairman or the board of directors.

Accepted Answer

By reporting directly to the chairman or the board of directors, internal auditors can maintain their independence and objectivity when conducting audits. This ensures that they are not influenced by management or other parties involved in the operations they are auditing. Additionally, reporting to the highest levels of the organization can also help to ensure that audit findings and recommendations are given the necessary attention and resources to be effectively implemented.

Question 5

Comparable performance is one source of evaluation criteria for completing a performance audit.

Accepted Answer

Comparable performance, or comparing an entity's performance to similar or related entities, is a common evaluation criteria in performance auditing. It allows auditors to identify areas where an entity is excelling or falling behind in comparison to their peers.

Question 6

The two most important qualities for an internal auditor to possess are independence and competence.

Accepted Answer

Independence ensures that the auditor is unbiased and objective in their assessment, while competence ensures that the auditor has the necessary skills and knowledge to effectively perform their duties. These two qualities are essential for maintaining the integrity and effectiveness of the internal audit function.

Question 7

The key issues for an external auditor evaluating a client's internal audit function are the:
A) competence and professionalism of internal audit staff.
B) timing and scope of the internal audit's work.
C) size of the internal audit function and its reporting independence.
D) quality of internal audit work and the independence of the internal audit function.

Accepted Answer

The key issues for an external auditor evaluating a client's internal audit function are primarily the quality of internal audit work and the independence of the internal audit function. While the competence and professionalism of internal audit staff, timing and scope of their work, and the size of the internal audit function are also important factors, they ultimately contribute to the quality of the internal audit work and independence of the function. Therefore, choice D is the best answer.

Question 8

The objectives of internal auditors are similar to the objectives of external auditors.

Accepted Answer

Internal auditors and external auditors both aim to provide assurance and evaluate the effectiveness of an organization's internal controls, risk management, and financial reporting. However, internal auditors typically focus on providing assurance and advice to management, while external auditors provide an independent opinion to stakeholders outside of the organization.

Question 9

Which of the following are the two most important qualities for a performance auditor?
A) independence and competence
B) competence and technical training
C) academic background and sufficient experience
D) personality and appearance

Accepted Answer

Independence and competence are the two most important qualities for a performance auditor. Independence ensures that the auditor can work without bias or prejudice, while competence ensures that the auditor has the necessary skills and knowledge to perform their duties effectively. Technical training, academic background, and experience are also important, but they are subsumed under the broader categories of independence and competence. Personality and appearance are not relevant qualities for a performance auditor.

Question 10

Discuss each of the three broad categories (types)of performance audits.

Accepted Answer

The answer of Discuss each of the three broad categories...

Question 11

Discuss each of the three phases of a performance audit.

Accepted Answer

The answer of Discuss each of the three phases of...

Question 12

The Institute of Internal Auditors Professional Practice Standards require that internal auditors should be independent of:
A) their employer.
B) the controller's function within their organisation.
C) the line function within their organisation.
D) the activities they audit.

Accepted Answer

Internal auditors must be independent of the activities they audit to ensure objectivity and impartiality in their audit work, according to the Institute of Internal Auditors Professional Practice Standards.

Question 13

Which of the following would NOT be a source that the performance auditor can utilise in developing specific evaluation criteria?
A) discussion and agreement between the management of the entity to be audited, the operational auditor, and the entity or persons to whom the findings will be reported
B) generally accepted accounting principles
C) benchmarking, such as the data of comparable entities
D) historical performance, such as results from prior periods

Accepted Answer

Generally accepted accounting principles are accounting standards that are mandatory to be followed and cannot be used as a source to develop evaluation criteria as they are already established guidelines. The other options, including discussion and agreement between management, operational auditor, and reporting entity or persons, benchmarking with comparable entities, and historical performance from prior periods can be utilised to develop specific evaluation criteria.

Question 14

One disadvantage of functional auditing is the failure to evaluate interrelated functions.

Accepted Answer

Functional auditing focuses on evaluating individual functions and processes separately, which can result in overlooking the interdependencies and interactions between various functions. This can lead to incomplete assessments and missed opportunities for identifying and addressing systemic issues.

Question 15

If internal auditors are effective, then the external auditor is justified in reducing the assessed level of control risk.

Accepted Answer

If internal auditors are effective, they provide greater assurance that controls are operating effectively, reducing the assessed level of control risk for the external auditor.

Question 16

Which one of the following statements is NOT correct?
A) Internal auditors should be independent of the activities they audit.
B) Objectivity requires that internal auditors have an independent mental attitude.
C) The internal auditor should not be responsible for correcting deficiencies when ineffective or inefficient operations are found.
D) It is acceptable for internal auditors to recommend changes in operations and to install and implement the operating systems, as long as they do not have the responsibility for operating them throughout the year.

Accepted Answer

Internal auditors should maintain objectivity and independence in their role. While they can recommend changes to improve operations, actively installing and implementing operating systems could compromise their independence and objectivity, as they should not be involved in the management or operation of the systems they audit.

Question 17

Confirmation and re-performance are used less extensively for most performance audits than for financial audits.

Accepted Answer

Confirmation and re-performance techniques are more commonly used in financial audits where the auditor must gather evidence to support the financial statements, whereas performance audits focus on examining the effectiveness, efficiency, and economy of operations and programs, and therefore may rely on other types of evidence.

Question 18

Discussion and agreement is one source of evaluation criteria for completing a performance audit.

Accepted Answer

Discussion and agreement among stakeholders, such as management and employees, can help establish evaluation criteria for a performance audit. This ensures that the audit is focused on the areas that are most important and relevant to the organization, and that the audit findings are useful and actionable. Additionally, involving stakeholders in the evaluation process can help build trust and cooperation, and facilitate the implementation of audit recommendations.

Question 19

Independence of internal auditors is enhanced appropriately by having the internal audit department report to the:
A) controller.
B) board of directors.
C) external auditor.
D) treasurer.

Accepted Answer

Reporting to the board of directors enhances the independence of internal auditors by providing them with direct access to the highest level of governance. This allows them to operate independently and objectively, without fear of retaliation or undue influence from management. Reporting to the controller, treasurer, or external auditor could create potential conflicts of interest or other issues that could compromise the independence of the internal audit department.

Question 20

Current professional auditing standards prohibit external auditors from using internal auditors for direct assistance on external audits.

Accepted Answer

Current professional auditing standards allow external auditors to use internal auditors for direct assistance on external audits, but require certain conditions to be met, including supervision and evaluation of internal auditors' work by the external auditor.

Quiz 19: Other auditing and assurance engagements

The Institute of Internal Auditors Practice Standards regarding attributes include four categories of guidance that encompass both financial and operational auditing.List these categories of the Attribute Standards.

A major difficulty in performance auditing is deciding on specific criteria for evaluating whether efficiency and effectiveness have occurred.Discuss two other sources of criteria that the operational auditor can use.

Which one of the following is NOT one of the three phases in a performance audit?

To help them remain independent of the operations they audit, internal auditors should report directly to the chairman or the board of directors.

Comparable performance is one source of evaluation criteria for completing a performance audit.

The two most important qualities for an internal auditor to possess are independence and competence.

The key issues for an external auditor evaluating a client's internal audit function are the:

The objectives of internal auditors are similar to the objectives of external auditors.

Which of the following are the two most important qualities for a performance auditor?

Discuss each of the three broad categories (types)of performance audits.

Discuss each of the three phases of a performance audit.

The Institute of Internal Auditors Professional Practice Standards require that internal auditors should be independent of:

Which of the following would NOT be a source that the performance auditor can utilise in developing specific evaluation criteria?

One disadvantage of functional auditing is the failure to evaluate interrelated functions.

If internal auditors are effective, then the external auditor is justified in reducing the assessed level of control risk.

Which one of the following statements is NOT correct?

Confirmation and re-performance are used less extensively for most performance audits than for financial audits.

Discussion and agreement is one source of evaluation criteria for completing a performance audit.

Independence of internal auditors is enhanced appropriately by having the internal audit department report to the:

Current professional auditing standards prohibit external auditors from using internal auditors for direct assistance on external audits.