Chap02_IPPF

A primary purpose of the Standards is to:

• Promote coordination of internal and external audit efforts.

• Establish a basis for evaluating internal audit performance.

• Develop consistency in internal audit practices.

• Provide a codification of existing practices.

Which of the following are "mandatory guidance" in The IIA’s IPPF?

I. Implementation Guides.

II. The Code of Ethics.

III. The Definition of Internal Auditing.

IV. The Standards.

• a. I, II, and IV.

• b. II and IV.

• c. II, III, and IV.

• d. I, II, III, and IV

An internal auditor provides income tax services during the tax season. For which of the following activities would the auditor most likely be considered in violation of The IIA’s Code of Ethics?

• Preparing, for a fee, a division manager’s personal tax returns.

• Appearing on a local radio show to discuss retirement planning and tax issues.

• Receiving a stipend for teaching an evening tax class at the local junior college.

• Working on weekends for a friend who has a small CPA firm.

An internal auditor is auditing a division in which the division’s chief financial oficer (CFO) is a close, personal friend. The auditor learns that the friend is to be replaced after a series of critical contract negotiations with the Department of Defense. The auditor relays this information to the friend. Which principle of The IIA’s Code of Ethics has been violated?

• a. Integrity.

• b. Objectivity.

• c. Confidentiality.

• d. Privacy.

In which of the following situations does the internal auditor potentially lack objectivity?

• a. A payroll accounting employee assists an internal auditor in verifying the physical inventory of small motors.

• b. An internal auditor discusses a significant issue with the vice president to whom the auditee reports prior to drating the audit report.

• c. An internal auditor recommends standards of control and performance measures for a contract with a service organization for the processing of payroll and employee benefits.

• d. A former purchasing assistant performs a review of internal controls over purchasing four months after being transferred to the internal audit depatment.

According to the Standards, which of the following must the internal audit manager think about when considering appropriate due care while planning an assurance engagement?

• a. The oppotunity to cross-train internal audit staff.

• b. The cost of assurance in relationship to potential

  benefits.

• c. Job openings in the area that may be of interest to internal auditors assigned to the engagement.

• d. The potential to deliver consulting services to the auditee.

Which of the following is a Core Principle for the Professional Practice of Internal Auditing?

• a. Maintain confidentiality.

• b. Promote an ethical culture in the internal audit profession.

• c. Develop consistency in internal audit practices.

• d. Is appropriately positioned and adequately resourced.

In addition to the Standards, some internal audit departments follow other standards in conducting their work, either because of regulatory requirements or by choice. When these other standards are inconsistent with IIA standards, should the audit department do?

• a. Follow IIA Standards.

• b. Follow the other standards.

• c. Follow the standard that is least restrictive.

• d. Follow the standard that is most restrictive.

Which of the following would be a violation of The IIA’s Code of Ethics?

• a. An internal auditor was subpoenaed in a court case in which a joint venture partner claimed to have been defrauded by the auditor’s company. The auditor divulged confidential audit information to the cout during testimony.

• b. During an audit, an internal auditor learned that the company was about to introduce a new product that would revolutionize the industry. Because of the probable success of the new product, the product manager suggested that the internal auditor buy additional stock in the company, which the auditor did.

• c. An internal auditor’s husband inherited 25,000 shares of company stock when his grandfather died. They have held the stock for more than two years.

• d. An internal auditor works weekends doing tax returns for a friend who owns a small CPA firm.

According to the Standards, how is the independence of the internal audit function achieved?

• a. Staffing and supervision.

• b. Organizational status and objectivity.

• c. Human relations and communications

• d. Quality assurance and internal review.