An auditor assesses control risk because it

What should the CAE do if the scope of the internal audit plan is insufficient to permit expression of an opinion about risk management and control?

Which of the following factors should an internal auditor consider when planning an audit of an activity?

In planning an assurance engagement, a survey could assist with all of the following except

Checklists used to assess risk have been criticized for all of the following reasons except

An assurance engagement in the quality control department is being planned. Which of the following is least likely to be used in the preparation of a preliminary survey questionnaire?

Developing engagement observations, conclusions, and recommendations involves comparing the condition with the relevant standard or criterion. Which of the following choices best represents an appropriate standard or criterion to support engagement observations, conclusions, and recommendations?

If an engagement client’s operating standards are vague and thus subject to interpretation, the internal auditor must

In evaluating the effectiveness and efficiency with which resources are employed, an internal auditor is responsible for

Which of the following statements is true with respect to a time budget for an internal audit engagement?

According to the International Professional Practices Framework, to achieve engagement objectives, which of the following is not the responsibility of the internal auditors?

The auditor-in-charge for a financial audit is planning an engagement. Auditors will travel to a remote location to learn about the industry and business. The auditors will need to be able to work independently. Prior to allocating engagement resources, the auditor-in-charge should

To determine whether credit controls are inconsistently applied, preventing valid sales to creditworthy customers, the internal auditor should

Which of the following documents should the internal auditor examine to determine whether only authorized purchases are being accepted by the receiving department?

An organization uses electronic data interchange and online systems rather than paper-based documents for purchase orders, receiving reports, and invoices. Which of the following audit procedures would an auditor use to determine if invoices are paid only for goods received and at approved prices?

An internal audit activity is planning an assurance engagement in the transportation department of a large engineering firm. The firm owns and operates a fleet of cars and trucks of various sizes. One engagement objective is to evaluate the department’s vehicle maintenance procedures. Which procedures are appropriate to this engagement objective?

1. Interview service technicians to gather information about maintenance procedures.

2. Compare costs for selected procedures with industry standards.

3. Compare manufacturer maintenance guidelines with departmental procedures.

4. Analyze vehicle losses

Contributions to a nonprofit organization have been constant for the past 3 years. The audit committee has become concerned that the president may have embarked on a scheme in which some of the contributions from many sustaining members have been redirected to other organizations. The audit committee suspects that the scheme may involve taking major contributions and depositing them in alternative accounts or soliciting contributions to be made in the name of another organization. Which of the following procedures should be most effective in detecting the existence of such a fraud?

The manager of a production line has the authority to order and receive replacement parts for all machinery that requires periodic maintenance. The internal auditor received an anonymous tip that the manager ordered substantially more parts than were necessary from a family member in the parts supply business. The unneeded parts were never delivered. Instead, the manager processed receiving documents and charged the parts to machinery maintenance accounts. The payments for the undelivered parts were sent to the supplier, and the money was divided between the manager and the family member. Which of the following tests would best assist the auditor in deciding whether to investigate this anonymous tip further?

An investment portfolio manager has the authority to use financial derivatives to hedge transactions but is not supposed to take speculative positions. However, the manager launches a scheme that includes (1) taking a position larger than required by the hedge, (2) putting the speculative gains in a suspense account, and (3) transferring the funds to a nonexistent broker and from there to a personal account. Which of the following engagement procedures is least effective in detecting this fraud?

An internal auditor traces individual time tickets to the payroll cost distribution and also traces totals from the payroll cost distribution to the various work-in-process accounts. If no exceptions are found, this procedure constitutes information indicating that

A subsidiary president terminated a controller and hired a replacement without the required organizational approvals. Sales, cash flow, and profit statistics were then manipulated by the new controller and president via accelerated depreciation and sale of capital assets to obtain larger performance bonuses for the controller and the subsidiary president. An approach that might detect this fraudulent activity is

An entity is beginning its budget cycle. Approval of the capital budget by the board of directors is the first step in the process. Until final approval, only the CEO and division vice presidents have access to it. During the multiple iterations of the capital budget, hard copies are printed and distributed to authorized persons or their administrative assistants. Which procedure should an internal auditor perform to gain assurance that IT personnel are not distributing the capital budget reports to unauthorized employees?

1. Interviewing IT personnel responsible for programming the budgetary applications.

2. Interviewing computer operations personnel and reviewing logs of abnormal program terminations.

3. Reviewing the log signed by those receiving the reports.

4. Interviewing all authorized personnel or their administrative assistants to determine whether they received the reports.

The purpose of including a time budget in an engagement work program is to

An internal auditor determines that actual procedures differ from prescribed control procedures. The internal auditor should

1. Require operating personnel to conform to prescribed procedures.

2. Document the discrepancies and make any appropriate recommendations to management.

3. Expand all aspects of the engagement to determine other differences from prescribed procedures.

4. Modify the engagement work program as warranted by the differences noted.

Writing an engagement work program most likely occurs at which stage of the engagement?

To determine the sufficiency of information regarding interpretation of a contract, an internal auditor uses

While performing an engagement relating to an organization’s cash controls, the internal auditor observed that cash deposits are not deposited intact daily. A comparison of a sample of cash receipts lists revealed that each cash receipt list equaled cash journal entry amounts but not daily bank deposits amounts, and cash receipts list totals equaled bank deposit totals in the long run. This information as support for the internal auditor’s observations is

An internal auditor has set an engagement objective of determining whether all cash receipts are deposited intact daily. To satisfy this objective, the internal auditor interviewed the controller who gave assurances that all cash receipts are deposited as soon as is reasonably possible. As information that can be used to satisfy the stated engagement objective, the controller’s assurances are

Which of the following is an essential factor in evaluating the sufficiency of information? The information must

An internal auditor’s objective is to determine the cause of inventory shortages shown by the physical inventories taken by an independent service organization that used some engagement client personnel. The internal auditor addresses this objective by reviewing the count sheets, inventory printouts, and memos from the last inventory. The source of information and the sufficiency of this information are

The internal auditor is concerned with the overall valuation of inventory. Rank the following sources of engagement information from most persuasive to least persuasive in addressing the assertion as to the valuation of inventory.

1. Calculate inventory turnover by individual product.

2. Assess the net realizability of all inventory items with a turnover ratio of 2.0 or less by interviewing the marketing manager as to the marketability of the product.

3. Calculate the net realizable value (NRV) of all inventory products (using software to calculate NRV based on the last selling price) and compare NRV with cost.

4. Take a statistical sample of inventory and examine the latest purchase documents (invoices and receiving slips) to calculate inventory cost.

In an engagement to review travel expenses, the internal auditor calculates average expenses per day traveled for all sales personnel and then examines detailed receipts for those with high averages. These procedures represent the identification of which types of information?

When evaluating the propriety of a payment to a consultant, the most appropriate information for the internal auditor to obtain and review is

A set of engagement workpapers contained a copy of a document providing information that an expensive item that had been special-ordered was actually on hand on a particular date. The most likely source of this information is a printout from a computerized

An internal auditing manager is conducting the annual meeting with manufacturing division management to discuss proposed engagement plans and activities for the next year. After some discussion about the past year’s activity at 12 plants in the division, the divisional vice president agrees that all significant recommendations made by the internal auditing staff refer to key controls and related operating activities that are correctly described for local management within the volume of standard operating procedures for the division. The vice president proposes to transcribe key control activities from the division’s extensive written procedures to a self-assessment standard operating procedure (SOP) questionnaire. What significance should the internal auditing manager attach to such SOP questionnaires in relation to the proposed engagement schedule for the next year?

The current internal auditing engagement to evaluate disbursements activities shows a significant number of errors made during the accounts payable vouchering process that have resulted in lost discounts and an extraordinary number of adjustments and credit memos. Engagement hours are already over budget in this section because of the number of exceptions to be analyzed. Internal auditing staff has had time to observe the operations performed by each of the voucher clerks; sample and analyze transaction documents in the accounts payable, purchasing, and receiving departments; and obtain system statistics on transaction volume, error-correction transactions, and lost-discount summaries. To date, the causes for all types of errors noted during detail testing, observation, and analysis of exceptions have not been fully identified in any of the three departments. The most appropriate course of action for the lead internal auditor to determine the causes of these errors is to

As part of the test of the effectiveness of a disaster recovery plan, the auditor plans to interview five employees from each of five different departments (25 employees in all). After the first few interviews, what would be the best way for the auditor to remain attentive during the remaining interviews?

During an interview with a data input clerk to discuss a computerized system used to track employee training requirements and compliance, an internal auditor identifies a potentially significant weakness in the system. The internal auditor should

The auditor conducted an interview with the supervisor. The auditor noted that the supervisor became uncomfortable and nervous, and changed the subject whenever the auditor raised questions about certain types of claims. The supervisor’s answers were consistent with company policies and procedures. When documenting the interview, the auditor should

When an internal auditor is interviewing to gain information, (s)he will not be able to remember everything that was said in the interview. The most effective way to record interview information for later use is to

Internal auditors should be active listeners to gain the most information in an internal audit interview. Which of the following best describes how an active listener behaves in an interview? The listener

Internal auditors often flowchart a control system and reference the flowchart to narrative descriptions of certain activities. This is an appropriate procedure to

During an engagement, the internal auditor should consider the following factor(s) in determining the extent to which analytical procedures should be used during the engagement

The internal auditor wishes to assess the impact of advertising expense on sales of fall merchandise. Which of the following is the most appropriate procedure?

Which of the following is an unnecessary feature of a workpaper prepared in connection with maintenance costs?

An internal auditor’s workpapers should support the observations, conclusions, and recommendations to be communicated. One of the purposes of this requirement is to

The consumer products division of a large corporation has recently adopted a training program for its sales staff. The internal auditor has determined that one-half of the sales force has received the training. In the 6-month period following introduction of the training program, productivity increased 4% on a per-salesperson basis for those who had received the training. The soundest conclusion the auditor can reach based on these findings is that

After an engagement report with adverse observations has been communicated to appropriate engagement client personnel, internal auditing’s proper action is to

Upon reviewing the final communication of engagement results, senior management decided to assume the risk of not implementing corrective action on certain engagement observations. Evaluate the following and select the best alternative for the chief audit executive: