Session 4 IAP

When internal auditors perform an assurance engagement, they consider

• How the assurance procedures can identify all significant risks.

• Whether the engagement needs to be supervised to ensure achievement of objectives.

• The cost of assurance in relation to the potential benefits to be obtained.

• Conformance with the organization’s code of conduct rather than The IAA’s Code of Ethics.

While auditing accounts receivable using analytical procedures, the internal auditors discovered the actual accounts receivable numbers were not within the limits of their projected results. Which of the following describes the best response in exercising due professional care under this situation?

• Confirm that all results of the analytical procedures are documented in the audit workpapers.

• Investigate unexpected results from the analytical procedures and make sure that they are adequately explained.

• Notify the CAE that the analytical procedures have uncovered fraud in the organization.

• Revise the limits of the projected results according to the needs and expectations of the client.

Internal auditors must continue to expand their professional knowledge and abilities. For example, a practicing internal auditor may

• Choose to complete at least 2 hours of an optional subject such as ethics training.

• Complete 30 hours of CPE annually or 60 hours over 2 years.

• Use the Competency Framework to plan professional development.

• Demonstrate professional development by supervising internal quality assessments.

In exercising due professional care, internal auditors must consider which of the following?

1. The relative complexity, materiality, or significance of matters to which assurance procedures are applied

2. The extent of assurance procedures necessary to ensure that all significant risks will be identified

3. The probability of significant errors, irregularities, or noncompliance

• 1, 2, and 3.

• 1 and 2 only.

• 1 and 3 only.

• 2 and 3 only.

Due professional care calls for

• Detailed reviews of all transactions related to a particular function.

• Infallibility and extraordinary performance when the system of internal control is known to be weak.

• Testing in sufficient detail to give absolute assurance that noncompliance does not exist.

• Consideration of the possibility of material irregularities during every engagement.

In an assurance engagement performed with due professional care (DPC), internal auditors must

• Use technology-based data analysis.

• Not guarantee that all significant risks are identified.

• Apply care and skill beyond mere competence and reasonable prudence.

• Consider the cost and benefits of the consultation.

A certified internal auditor performed an assurance engagement to review a department store’s cash function. Which of the following actions will be deemed lacking in due professional care?

• Because of a highly developed system of internal control over the cash function, the final engagement communication assured senior management that no irregularities existed.

• A flowchart of the entire cash function was developed, but only a sample of transactions was tested.

• The final engagement communication included a well-supported recommendation for the reduction in staff, although it was known that such a reduction would adversely affect morale.

• Organizational records were reviewed to determine whether all employees who handle cash receipts and disbursements were bonded.

An internal auditor judged an item to be material when planning an assurance engagement. However, the assurance engagement may exclude the item if it is subsequently determined that

• Adverse effects related to the item are very unlikely to occur.

• Sufficient staff is not available.

• Related information is unreliable.

• Recurring income is unaffected.

Internal auditors who fail to maintain their proficiency through continuing education could be found to be in violation of

• The International Standards for the Professional Practice of Internal Auditing.

• Both the International Standards for the Professional Practice of Internal Auditing and The IIA’s Code of Ethics.

• The IIA’s Code of Ethics.

• None of the answers are correct.

An internal auditor observes that a new receivables clerk has physical access to accounting records. Accordingly, the auditor notes in the engagement working papers that controls over receipts are inadequate. Has the auditor exercised due professional care?

• Yes, the engagement working papers were annotated.

• Yes, irregularities were noted.

• Yes, alertness to conditions most likely indicative of irregularities was shown.

• No, reasonable care was not taken.