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WorksheetsChapter 14
Total questions: 15
Worksheet time: 8mins
Recommendations should be included in final audit communications to:
Provide management with options for addressing audit observations
Ensure that problems are resolved in the manner suggested by the auditor
Minimize the amount of time required to correct audit observations.
Guarantee that audit observations are addressed, regardless of cost
Reported internal audit observations emerge by a result of comparing "what should be" with "what is". In determining "what should be" during an internal audit engagement, which of the following would be the least appropriate criterion against which to assess current controls?
Industry best practices
Control policies and procedures prescribed by senior management
A standard of control effectiveness determined by the internal audit function
The controls documented as being in place during the last audit
According to the International Professional Practices Framework (IPPF), an engagement final communication should include, at minimum, which of following?
I. Background information
II. Purpose of the engagement
III. Engagement scope
IV. Results of the engagement
V. Summaries
I, II, an III
I, III, and V
II, III, and IV
II, IV, and V
Which of the following would not be considered a primary objective of a closing or exit conference?
To resolve conflicts
To identify concerns for future audit engagements
To discuss the engagement observations and recommendations
To identify management's actions and responses to the engagement observations and recommendations
During a review of purchasing operations, an internal auditor found that procedures in use did not agree with stated company procedures. However, audit tests revealed that the procedures used represented an increase in efficiency and a decrease in processing time, without a discernible decrease in control. The internal auditor should:
Report the lack of adherence to documented procedures as an operational deficiency
Develop a flowchart of the new procedures and include it in the report to management.
Report the change and suggest that the change in procedures be documented
Suspend the completion of the engagement client documents the new procedures
A formal enagement communication must:
Provide an opportunity for the auditee to respond
Document the corrective actions required of senior management
Provide a formal means by which the independent outside auditor assesses potential reliance on the internal audit function
Report significant observations
Which of the following does the CAE need to consider when determining the extent of follow up required?
I. Significance of the reposted observation
II. Past experience with the manager charged with the corrective action
III. Degree of effort and cost needed for the corrective action
IV. The experience of the internal audit staff.
I and III
I, II, and III
II, III, and IV
I, II, III, and IV
An excerpt from an internal audit observation indicates that travel advances exceeded prescribed maximum amounts. Company policy provides travel funds to authorized employees for travel. Advances are not exceed 45 days of anticipated expenses. Company procedures do not require justification for large travel advances. In this audit observation, the element of an audit observation known as "effect" is:
Advances are not to exceed estimated expenses for 45 days
Travel advances exceed prescribed maximum amounts
Employees accumulate large, unneeded advances, resulting in unnecessary allocation of capital
Unauthorized employees are given travel advances
Internal audit reports can be structured to motivate management to correct deficienceis. Which of the following report-writing techniques is most likely to be effective?
State the procedural inadequacies and resulting improprieties in specific terms
Recommend changes and state the punitive measures that will follow if the recommendations are not implemented
List the deficiences found so as to provide an easy-to-follow checklist
Suggest practical improvements to address the identified observations
The primary purpose of issuing an interim report during an internal audit is to:
Provide auditee management the opportunity to act on certain observations immediately
Set the stage for the final report
Promptly inform auditee management and their supervisors of audit procedures performed to date
Describe the scope of the audit
Who has primary responsibility for providing information to the audit committee on the professional and organizational benefits of coordinating internal audit assurance and consulting activities with other assurance and consulting activities?
The external auditor
The Chief Audit Executive (CAE)
The Chief Executive Officer (CEO)
Each assurance and consulting function
The primary reason for having written formal audit reports is to
Provide an opportunity for engagement client response
Document the corrective actions required of senior management
Provide a formal means by which the external auditor assess potential reliance on the internal audit function
Record observations and recommended courses of action
Which of the following statements best describes the internal audit function's responsibility for follow-up activities related to a previous engagement?
Internal auditors should determine if corrective action has been taken and is achieving the desired results or if management has assumed the risk of not taking the corrective action.
Internal auditors should determine if management has initiated corrective action, but they have no responsibility to determine if the action is achieving the desired results. That determination is management's responsibility
The CAE is responsible for scheduling follow-up activities only if directed to do so by senior management or the audit committee. Otherwise, follow-up is entirely discretionary
None of the above
A follow-up review found that a significant internal control weakness had not been corrected. The CAE discussed this matter with senior management and was informed of management's willingness to accept the risk. The CAE should:
Do nothing further because management is responsible for deciding the appropriate action to be taken in response to reported engagement observations and recommendations
Initiate a fraud investigation to determine if employees had taken advantage of the internal control weakness
Inform senior management that the weakness must be corrected and schedule another follow-up review
Assess the reasons that senior management decided to accept the risk and inform the board of senior management's decision
If an auditor's preliminary evaluation of internal controls results in an observation that controls may be inadequate, the next step would be to:
Expand audit work before the preparation of a final engagement communication
Prepare a flowchart depicting the internal control system
Note an exception in the engagement final communication if losses have occurred
Implement the desired controls
