Question 1

Senior management has ordered a compliance audit of the organization's employee benefits package.Which of the following do both the chief audit executive and senior management consider a primary engagement objective?
A) The level of the organizational contributions is adequate to meet the program's demands.
B) Individual programs are operating in accordance with contractual requirements and government regulations.
C) Participation levels support continuation of individual programs.
D) Benefits payments, when appropriate, are accurate and timely.

Accepted Answer

The answer of Senior management has ordered a compliance audit...

Question 2

Independence permits internal auditors to render impartial and unbiased judgments.The best way for internal audit departments to achieve independence is through
A) Individual knowledge and skills.
B) Organizational knowledge and skills.
C) Supervision within the organization.
D) Organizational status and individual objectivity.

Accepted Answer

Independence can be achieved through organizational status, such as having direct access to senior management and the board, and individual objectivity, which is maintained through ethical standards and a commitment to impartiality. Individual knowledge and skills and organizational knowledge and skills are important for ensuring the effectiveness of internal audit activities, but they do not directly contribute to independence. Supervision within the organization may also help ensure quality, but it does not necessarily lead to independence.

Question 3

Having an audit charter is important for internal audit departments.Which of the following items is generally not a reason to have an audit charter?
A) It provides a commitment from management to support the internal audit department's activities.
B) It defines the skills and competencies required by the internal audit department.
C) It defines the department's authority and responsibility.
D) It defines the reporting requirements for internal audit departments.

Accepted Answer

While defining the skills and competencies required by the internal audit department is important, it is not usually a specific reason to have an audit charter. The other items listed (providing a commitment from management, defining authority and responsibility, and defining reporting requirements) are all common components of an audit charter.

Question 4

Which of the following internal audits is generally not a type of government audit?
A) Review of compliance with policies, plans, procedures, laws, and regulations.
B) Review of the economy and efficiency in the use of resources.
C) Review of the means of safeguarding assets.
D) Review of the results of programs.

Accepted Answer

The answer of Which of the following internal audits is...

Question 5

The definition of internal audit includes all of the following except
A) Independence and objectivity.
B) Provision of assurance and consulting activity.
C) Determination of efficient and effective performance.
D) Additional value and improved operations.

Accepted Answer

The definition of internal audit includes independence and objectivity, provision of assurance and consulting activity, and additional value and improved operations. However, it does not include determination of efficient and effective performance as this is typically the responsibility of management or operations. Internal audit may evaluate efficiency and effectiveness as part of their assurance activities, but it is not their main focus.

Question 6

The purpose of the internal audit's evaluation of the effectiveness of existing risk management processes is to determine that
A) Management has planned and designed the process to provide reasonable assurance of achieving objectives and goals.
B) Management directs processes to provide reasonable assurance of achieving objectives and goals.
C) The organization's objectives and goals will be achieved efficiently and economically.
D) The organization's objectives and goals will be achieved in an accurate and timely manner and with minimal use of resources.

Accepted Answer

The purpose of the internal audit's evaluation of the effectiveness of existing risk management processes is to determine that management has planned and designed the process to provide reasonable assurance of achieving objectives and goals. This means that the internal audit evaluates the process itself and its design, rather than the outcome of the process.

Question 7

The Standards for the Professional Practice of Internal Audit of the Institute of Internal Auditors (IIA)is classified in three major categories.Which of the following is not one of these categories?
A) Attribute standards.
B) Performance standards.
C) Governance standards.
D) Implementation standards.

Accepted Answer

The answer of The Standards for the Professional Practice of...

Question 8

The definition of administrative control does not include reference to
A) Operational efficiency.
B) Accounting errors.
C) Adherence to managerial policies.
D) Plan of organization.

Accepted Answer

The definition of administrative control refers to the process of ensuring that organizational activities are carried out in accordance with established policies and procedures. It focuses on the plan of organization, operational efficiency, and adherence to managerial policies. However, it does not specifically address accounting errors, as this falls under the realm of financial control.

Question 9

When dealing with standards,measurements,and comparisons,input measurements are most important for audits of
A) Economy.
B) Efficiency.
C) Program results.
D) Financial statements.

Accepted Answer

Input measurements are most important for audits of financial statements as they involve verifying the accuracy and completeness of financial data and transactions.

Question 10

When preparing an audit report,an internal auditor must convince management to take action concerning the report's findings.When reporting on an audit finding,an auditor must include some key elements about that finding in the report.These key elements are
A) Condition, criteria, cause, effect, and recommendation.
B) Condition, criteria, cause, effect, and requirement.
C) Condition, source, cause, effect, and recommendation.
D) Location, criteria, cause, effect, and recommendation.

Accepted Answer

The key elements for reporting on an audit finding are condition (what is happening), criteria (what should be happening), cause (why the condition exists), effect (impact of the condition), and recommendation (how to improve the situation). These elements are commonly referred to as the 5 C's of audit reporting. Option A correctly identifies all these elements. Option B is incorrect because "requirement" refers to a mandatory standard that must be followed, which may not always be relevant in an audit finding. Option C is incorrect because "source" is not a standard element of audit reporting, and option D is incorrect because "location" is not necessarily relevant in every audit finding.

Question 11

The U.S.Government Accountability Office (GAO)standards do not specifically require a written report in financial statement audits for
A) Recommendations for actions to improve operations.
B) All instances of illegal acts that could result in criminal prosecution.
C) Compliance with applicable laws and regulations.
D) Internal control structure and the control risk assessment.

Accepted Answer

The GAO standards do not specifically require a written report for recommendations to improve operations, as these are often communicated verbally or in a management letter rather than in the formal audit report.

Question 12

Program audits include determining
A) The degree to which an entity is acquiring, protecting, and using its resources effectively.
B) The effectiveness of an organization's programs, activities, or functions.
C) The causes of an organization's inefficiencies or uneconomical practices.
D) The entity's compliance with laws and regulations concerning matters of efficiency.

Accepted Answer

Program audits mainly focus on examining the effectiveness of an organization's programs, activities, or functions. While options A, C and D may also be assessed during an audit, they are not the primary objective of program audits.

Question 13

The proper organizational role of internal auditing is to
A) Assist external auditors in reducing external audit fees.
B) Perform studies to assist in attaining more efficient operations.
C) Serve as an investigative arm of senior management and the board of directors.
D) Serve as an independent, objective assurance and consulting activity that adds value to the organization.

Accepted Answer

The proper organizational role of internal auditing is to serve as an independent, objective assurance and consulting activity that adds value to the organization. This involves providing assurance on the effectiveness of risk management, control, and governance processes, as well as providing consulting services to improve the organization's operations. Internal auditors should not serve as an investigative arm of senior management or the board of directors, nor should they be solely focused on reducing external audit fees or performing studies for efficiency purposes.

Question 14

The federal law that established uniform requirements for audits of federal assistance provided to state and local governments is called
A) The Single Audit Act of 1984.
B) The Uniform Requirements Act of 1992.
C) The Sarbanes-Oxley Act or 2002.
D) The Audit Reduction Act of 1985.

Accepted Answer

The Single Audit Act of 1984 established uniform requirements for audits of federal assistance provided to state and local governments. It requires recipients of federal funds to have a single audit conducted in accordance with federal guidelines. This act was later amended and recodified in the Office of Management and Budget (OMB) Uniform Guidance.

Question 15

During the audit of the quality control area,an auditor identified that a specific product has a 3 percent failure rate when tested.The specification calls for a failure rate of less than 1.8 percent.Product failure might lead to customer injury and in turn lawsuits against the company.The auditor has communicated this to management.Which of the following is not an acceptable response from management with regard to this risk?
A) Management is aware of the risk and has decided that it is acceptable.
B) Management has decided not to continue manufacturing this product.
C) Management has decided to increase the quality control activity to reduce the manufacture of unacceptable product to an acceptably low level.
D) Management has decided that the test data are unreliable and has decided not to respond to the audit findings.

Accepted Answer

Management cannot simply dismiss the test findings as unreliable without providing evidence to support their claim. This would not be an acceptable response and would not address the risk identified by the auditor. Options A, B, and C all address the risk in some way by acknowledging it and taking action to mitigate it.

Question 16

The primary difference between operational auditing and financial auditing is that in operational auditing,the auditor
A) Is concerned only with the audited activity's adherence to company policy and procedures.
B) Is seeking to help management use resources in the most effective manner possible.
C) Starts the process with the financial statements of an activity being audited and works backward to the basic processes involved in producing them.
D) Can use analytical skills and tools that are not necessary in financial auditing.

Accepted Answer

Operational auditing is concerned with examining the effectiveness and efficiency of an organization's operations and management's use of resources. The auditor seeks to identify opportunities for improvement and provide recommendations to enhance the efficiency and effectiveness of operations. Financial auditing, on the other hand, primarily focuses on the accuracy and reliability of financial statements and ensuring compliance with accounting standards and regulations. While both types of audits may use analytical skills and tools, operational auditing involves a more in-depth analysis of an organization's operations and processes.

Question 17

Which of the following is a requirement of the Standards for the Professional Practice of Internal Audit if the Institute of Internal Auditors (IIA)that is not a requirement of an external auditor performing a financial statement audit?
A) Due care.
B) Internal control evaluation.
C) Reporting to the audit committee.
D) Performing a follow-up on audit findings.

Accepted Answer

The answer of Which of the following is a requirement...

Question 18

The Standards for the Professional Practice of Internal Auditing of the Institute of Internal Auditors (IIA)does not include the broad category of
A) Proficiency and due care.
B) Nature of work.
C) Performance of the engagement.
D) Quality control.

Accepted Answer

The Standards for the Professional Practice of Internal Auditing include categories such as Proficiency and Due Care, Nature of Work, and Performance of the Engagement, but Quality Control is not one of the broad categories outlined by the IIA.

Question 19

The reasons for outsourcing an internal audit include
A) More expertise only.
B) More expertise and improved control over audit costs.
C) Improved control over audit costs and improved alignment with company goals.
D) All of the above.

Accepted Answer

Outsourcing an internal audit can provide more expertise and improved control over audit costs, as external firms often have specialized knowledge and can offer flexible pricing.

Question 20

Your organization has selected you to develop an internal audit activity.Your approach will most likely be to hire
A) Internal auditors each of whom possess the skills required to handle all engagements.
B) Inexperienced personnel and train them the way the organization wants them trained.
C) Degreed accountants because most internal audit work is accounting related.
D) Internal auditors who collectively have the knowledge and skills needed to perform the responsibilities of the internal audit activities.

Accepted Answer

The best approach would be to hire internal auditors who collectively have the knowledge and skills needed to perform the responsibilities of the internal audit activities. Internal audit engagements can vary and require a diverse range of skills and knowledge in areas such as finance, IT, risk management, and compliance. Hiring a team with a diverse skill set will allow the internal audit activity to effectively and efficiently perform its responsibilities.

Quiz 16: Internal Governmental and Fraud Audits

Senior management has ordered a compliance audit of the organization's employee benefits package.Which of the following do both the chief audit executive and senior management consider a primary engagement objective?

Independence permits internal auditors to render impartial and unbiased judgments.The best way for internal audit departments to achieve independence is through

Having an audit charter is important for internal audit departments.Which of the following items is generally not a reason to have an audit charter?

Which of the following internal audits is generally not a type of government audit?

The definition of internal audit includes all of the following except

The purpose of the internal audit's evaluation of the effectiveness of existing risk management processes is to determine that

The Standards for the Professional Practice of Internal Audit of the Institute of Internal Auditors (IIA) is classified in three major categories.Which of the following is not one of these categories?

The definition of administrative control does not include reference to

When dealing with standards,measurements,and comparisons,input measurements are most important for audits of

When preparing an audit report,an internal auditor must convince management to take action concerning the report's findings.When reporting on an audit finding,an auditor must include some key elements about that finding in the report.These key elements are

The U.S.Government Accountability Office (GAO) standards do not specifically require a written report in financial statement audits for

Program audits include determining

The proper organizational role of internal auditing is to

The federal law that established uniform requirements for audits of federal assistance provided to state and local governments is called

The primary difference between operational auditing and financial auditing is that in operational auditing,the auditor

Which of the following is a requirement of the Standards for the Professional Practice of Internal Audit if the Institute of Internal Auditors (IIA) that is not a requirement of an external auditor performing a financial statement audit?

The Standards for the Professional Practice of Internal Auditing of the Institute of Internal Auditors (IIA) does not include the broad category of

The reasons for outsourcing an internal audit include

Your organization has selected you to develop an internal audit activity.Your approach will most likely be to hire