Internal Audit - Midterm

Which of the following risk management activities is out of sequence in terms of timing?

• Identify, assess, and prioritize risks.

• Develop risk responses/treatments.

• Determine key organizational objectives.

• Monitor the effectiveness of risk responses / treatments.

One of the challenges of ERM in an organization that has a centralized structure is that

• It may be difficult to raise awareness of the impact of work actions on other employees or work areas.

• Employees in these structures are inherently less risk averse.

• Managers have less incentive to implement and monitor controls.

• Effective controls are more difficult to design, and consistent application is more difficult to achieve across the organization

Which of the following is/are components of the Standards?

I. Statements.

II. Interpretations.

III. Glossary.

• I only.

• I and II.

• I and III.

• I, II, and III.

Assurance, Insight, and Objectivity comprise:

• The mission of internal auditing

• The three lines of defense model.

• The objectives of internal auditing

• The value proposition

Who is ultimately responsible for identifying new or emerging key risk areas that should be covered by the organization’s governance process?

• The board of directors.

• Senior management.

• Risk owners.

• The internal audit function

Which of the following would be considered a second line of defense in the Three Lines of Defense model?

• An accounts payable supervisor conducting a weekly review to ensure all payments were issued by the required payment date.

• A divisional compliance and ethics officer conducting a review of employee training records to ensure that all marketing and sales staff have completed the required FCPA training.

• A shift supervisor inspecting a sample of finished goods to ensure quality standards are met.

• An internal audit team conducting an engagement to provide assurance on the company’s Sarbanes-Oxley compliance with internal controls over financial reporting.

In assessing organizational risk in a manufacturing organization, which of the following would have the greatest long range impact on the organization?

• Advertising budget

• Production scheduling

• Inventory policy

• Product quality

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

Internal auditors must have competent interpersonal skills. Which of the following does not represent an attribute of interpersonal skills?

• Communication.

• Project management.

• Team capabilities.

• Critical thinking

?

Which of the following is not an appropriate governance role for an organization’s board of directors?

• Evaluating and approving strategic objectives

• Influencing the organization’s risk-taking philosophy

• Providing assurance directly to third parties that the organization’s governance processes are effective.

• Establishing broad boundaries of conduct, outside of which the organization should not operate.