Certified Internal Auditor - Part 2 Conducting the Internal Audit Engagement
Last exam update: Jul 20 ,2024
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Question 1
Which of the following statements is true regarding the final assurance engagement report issued to management?
A. Ratings are only used to assess the condition of an observation made by an internal auditor.
B. Audit findings may be communicated to management prior to issuance of the final approved audit report.
C. Communications must be relevant logical, and free from errors before they are disseminated.
D. The audit report must present the information in the following order (1) audit scope, (2) engagement objectives, and (3) engagement results
Answer:
C
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Question 2
An internal auditor uses a data query tool in the purchasing process to review the vendor master file for authorizations Which of the following describes the control objective likely being tested?
A. Effectiveness
B. Response
C. Efficiency
D. Mitigation.
Answer:
A
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Question 3
An internal auditor is asked to determine why the production line for a large manufacturing organization has been experiencing shutdowns due to unavailable pacts The auditor learns that production data used for generating automatic purchases via electronic interchange is collected on personal computers connected by a local area network (LAN) Purchases are made from authorized vendors based on both the production plans for the next month and an authorized materials requirements plan (MRP) that identifies the parts needed per unit of production The auditor suspects the shutdowns are occurring because purchasing requirements have not been updated for changes in production techniques Which of the following audit procedures should be used to test the auditor's theory?
A. Compare purchase orders generated from test data input into the LAN with purchase orders generated from production data for the most recent period
B. Develop a report of excess inventory and compare the inventory with current production volume
C. Compare the pans needed based on current production estimates and the MRP for the revised production techniques with the purchase orders generated from the system for the same period
D. Select a sample of production estimates and MRPs for several periods and trace them into the system to determine that input is accurate
Answer:
C
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Question 4
An internal auditor is asked to determine why the production line for a large manufacturing organization has been experiencing shutdowns due to unavailable pacts The auditor learns that production data used for generating automatic purchases via electronic interchange is collected on personal computers connected by a local area network (LAN) Purchases are made from authorized vendors based on both the production plans for the next month and an authorized materials requirements plan (MRP) that identifies the parts needed per unit of production The auditor suspects the shutdowns are occurring because purchasing requirements have not been updated for changes in production techniques. Which of the following audit procedures should be used to test the auditor's theory?
A. Compare purchase orders generated from test data input into the LAN with purchase orders generated from production data for the most recent period
B. Develop a report of excess inventory and compare the inventory with current production volume
C. Compare the pans needed based on current production estimates and the MRP for the revised production techniques with the purchase orders generated from the system for the same period
D. Select a sample of production estimates and MRPs for several periods and trace them into the system to determine that input is accurate
Answer:
C
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Question 5
An internal auditor is conducting an initial risk assessment of an audit area and wants to assess management's compliance with privacy laws for safeguarding customer information stored on the organization's servers Which course of action is appropriate for this phase of the engagement?
A. Solicit the services of a specialist information systems auditor
B. Obtain the most current approved copies of the organization's privacy policy
C. Consult with legal counsel about new privacy laws to establish appropriate criteria
D. Consider the detection risk of noncompliance with the laws
Answer:
C
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Question 6
Which of the following statements about including consulting engagements in the annual internal audit plan is true?
A. All requests for consulting engagements must be included in the annual internal audit plan
B. Assurance engagements must be included in the annual internal audit plan but there is no requirement to include consulting engagements
C. Consulting engagements do not need to be included m the annual internal audit plan unless requested by the board
D. The acceptance of proposed consulting engagements into the annual internal audit plan may depend on their ability to add value
Answer:
D
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Question 7
Which of the following are advantages of flowcharts over internal control questionnaires'' 1 Flowcharts reduce the need to test whether employees are observing internal control processes Flowcharts provide a visual depiction of the processes in the area under review 3. Flowcharts identify and prioritize internal control design weaknesses. 4 Flowcharts highlight the control points to help internal auditors evaluate control design
A. 1 and 3 only
B. 2 and 4 only.
C. 1.2. and 3 only
D. 2. 3 and 4 only
Answer:
D
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Question 8
According to HA guidance, which of the following statements regarding audit workpapers is true?
A. Audit reports should include the workpapers as a reference for the audit conclusions.
B. The internal auditor's workpapers are the primary reference for reported control deficiencies.
C. Ad-hoc communications with management of the area under review should be excluded from the workpapers.
D. Both draft and final versions of workpapers should be saved at the end of the engagement
Answer:
D
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Question 9
Which of the following statements is true regarding internal control questionnaires?
A. Internal control questionnaires are useful m evaluating the effectiveness of standard operating procedures
B. internal control questionnaires provide reliable documents allowing internal auditors to cover many control procedures in little time
C. Internal control questionnaires can be used by internal auditors as an interview guide
D. Internal control questionnaires provide direct audit evidence which may need corroboration
Answer:
D
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Question 10
An internal auditor for a regional bank suspects that the head of commercial lending has been granting loans without the required collateral Which of the following sampling techniques will be most effective for investigating the auditor's suspicion?
A. Variables sampling
B. Dollar-unit sampling
C. Judgmental sampling
D. Discovery sampling
Answer:
D
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Question 11
What is the primary purpose of issuing a preliminary communication to management of the area under review?
A. To build good relations with management
B. To help management develop more responsive and timely action plans
C. To formally report medium- and high-risk observations in writing
D. To improve the internal audit key performance indicators
Answer:
B
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Question 12
As part of the preliminary survey, an internal auditor sent an internal control questionnaire to the accounts payable function Based on the questionnaire responses, the auditor determines that there is no established procedure for adding and approving new vendors What would the auditor do next?
A. Determine that this situation is acceptable and focus on more significant issues
B. Document the issue m the draft audit report
C. Document the observation for further follow up when testing the operating effectiveness of controls
D. Interview the personnel associated with this observation.
Answer:
C
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Question 13
At a construction company, an internal auditor is planning an audit of the company's process for designing and building grid connections The process involves customers making payments m three parts The first payment of 10% after approval of the customer s application The second payment of 70% prior to construction The third payment of 20% after construction is complete Which of the following key controls should the auditor test to ensure that the company is not taking any unwanted credit risks?
A. Controls that ensure that grid connection design is finalized before construction is approved to begin
B. Controls that ensure construction orders are initiated after the second invoice is paid
C. Controls that ensure all three invoices are calculated correctly according to the total project cost
D. Controls that ensure that applications are verified for approval prior to initiating design and construction
Answer:
D
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Question 14
According to HA guidance, which of the following is the Key planning step internal auditors should perform to establish appropriate engagement objectives prior to starting an audit engagement?
A. Review the organizational structure, management roles and responsibilities and operating procedures
B. Evaluate management's risk assessment and the internal audit activity's risk assessment
C. Assess process How and control documents used to meet regulatory requirements
D. Review meeting notes from discussions involving management of the area to be reviewed.
Answer:
D
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Question 15
Which of the following is one of the five basic tnanoal statement assertions when an internal auditor evaluates controls over financial reporting?