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NEW QUESTION 260
According to IIA guidance, which of the following would not be a consideration for the internal audit activity (IAA) when determining the need to follow-up on recommendations?
- A. Complexity of the corrective action.
- B. Impact that may result should the corrective action fail.
- C. Degree of effort and cost needed to correct the reported condition.
- D. Amount of resources required to conduct the follow-up activities.
Answer: D
NEW QUESTION 261
An audit identified a number of weaknesses in the configuration of a critical client/server system. Although some of the weaknesses were corrected prior to the issuance of the audit report, correction of the rest will require between 6 and 18 months for completion. Consequently, management has developed a detailed action plan, with anticipated completion dates, for addressing the weaknesses. What is the most appropriate course of action for the chief audit executive to take?
- A. Assess the status of corrective action during a follow-up audit engagement after the action plan has been completed.
- B. Evaluate the ability of the action plan to correct the weaknesses and monitor key dates and deliverables.
- C. Reassign information systems auditors to assist in implementing management's action plan.
- D. Assess the effectiveness of corrections by reviewing statistics related to unplanned system outages, and denials of service.
Answer: B
Explanation:
Section: Volume E
NEW QUESTION 262
In preparing to facilitate a control self-assessment session, an auditor would be least likely to ensure that:
- A. Key stakeholders are represented in the group.
- B. Background research is completed to familiarize the auditor with relevant issues.
- C. Management is consulted on the issues and priorities.
- D. An independent content expert is available to help settle disagreements.
Answer: D
NEW QUESTION 263
An organization does not have a formal risk management function. According to the Standards, which of the following are conditions where the internal audit activity (IAA) may provide risk management consulting?
1.There is a clear strategy and timeline to migrate risk management responsibility back to management.
2.The IAA has the final approval on any risk management decisions.
3.The IAA does not give objective assurance on any part of the risk management framework for which it is responsible.
4.The nature of services provided to the organization is documented in the internal audit charter.
- A. 1, 3, and 4 only
- B. 1, 2, and 3 only
- C. 2, 3, and 4 only
- D. 1, 2, and 4 only
Answer: A
NEW QUESTION 264
According to the Standards, which of the following best describes what must be agreed upon to establish an understanding with clients prior to starting a consulting engagement?
- A. The engagement objectives, access to clients records, and expectations.
- B. The engagement objectives, scope, respective responsibilities, and other client expectations.
- C. The engagement objectives, scope, and time frame to complete the engagement.
- D. The engagement scope, opportunities for making significant improvements, and client expectations.
Answer: B
Explanation:
Section: Volume D
NEW QUESTION 265
According to IIA guidance, which of the following are potential benefits of using an assurance map?
- A. Indication of any gaps in assurance coverage, and improved relevance of assurance recommendations.
- B. Enhanced effectiveness of assurance providers, and improved relevance of assurance recommendations.
- C. Identification of duplicate or overlapping assurance activities, and improved relevance of assurance recommendations.
- D. Indication of gaps in assurance coverage, and enhanced effectiveness of assurance providers.
Answer: D
NEW QUESTION 266
During an audit of the accounts receivable (AR) process, an internal auditor noted that reconciliations are still not performed regularly by the AR staff, a recommendation that was made following a previous audit. Monitoring by the financial reporting function has failed to detect the shortcoming. Both the financial reporting function and AR report to the controller, who is responsible for implementing action plans. Which of the following supports the internal auditor's decision to combine both observations into one reported finding?
- A. The observation was made during the same audit, and the action plan has a common owner.
- B. The observation has a common control, and it was noted in a prior audit.
- C. The observation relates to the same control activity within a common process.
- D. The observation has a common process, and the action plan for the observation has a common owner.
Answer: D
NEW QUESTION 267
Which of the following audit steps would be most effective to review proper recording of and accountability over physical assets?
I.Physically inspect all assets on the organization's property.
II.
Select a sample department and physically inspect assets in the department.
III.
Select a sample from the organization's records of physical assets and physically locate each asset.
IV.
Identify assets at a sample of locations and trace to the organization's records.
- A. II and III only.
- B. I and IV only.
- C. I only.
- D. III and IV only.
Answer: D
NEW QUESTION 268
The balanced scorecard approach differs from traditional performance measurement approaches because it adds which of the following measures?
I. Financial measures.
II. Internal business process measures.
III. Client satisfaction measures.
IV.
Innovation and learning measures.
- A. III and IV only
- B. I only
- C. II, III, and IV only
- D. II and IV only
Answer: C
NEW QUESTION 269
After completing a fraud investigation but before publishing a formal written report, the chief audit executive should submit a draft of the final report to the organization's:
- A. Chief executive officer.
- B. Audit committee chairperson.
- C. External auditor.
- D. Legal counsel.
Answer: D
Explanation:
Section: Volume B
NEW QUESTION 270
During an interview with a manager in a company's claims department, an auditor noted that the manager became nervous and changed the subject whenever the auditor raised questions about certain types of claims.
The manager's answers were consistent with company policies and procedures. When documenting the interview, the auditor should:
- A. Disregard the interview entirely because the verbal and nonverbal communications were contradictory.
- B. Conclude that the nonverbal communication is persuasive and that sufficient evidence exists to begin a fraud investigation.
- C. Document the manager's answers, noting the nature of the nonverbal communication.
- D. Document the manager's answers but not the nonverbal communication because it is subjective and is not corroborated.
Answer: C
Explanation:
Section: Volume A
NEW QUESTION 271
Which of the following best illustrates the primary focus of a risk-based approach to control self-assessment?
- A. To examine the processes involved in exploring, developing, and operating a gold mine.
- B. To evaluate controls regarding the computer security of an oil refinery.
- C. To assess the likelihood and impact of events associated with operating a finished goods warehouse.
- D. To link a financial institution's business objectives to a work unit responsible for the associated risk.
Answer: C
NEW QUESTION 272
An auditor receives anonymous information that fraud is occurring in the operation being audited, but no details are given as to the type of fraud or the individuals involved. There are several areas in which fraud could occur. The auditor should:
- A. Apply analytical procedures to areas that might be impacted by possible fraudulent activities.
- B. Identify the area that has the greatest volume of transactions and design a sampling plan for substantive testing.
- C. Plan detailed tests of the areas that have the highest dollar amount of transactions.
- D. Interview employees to identify areas where the fraud could be occurring.
Answer: A
NEW QUESTION 273
A company used simple regression analysis to analyze maintenance costs against machine hours (MH) for a 26-week period when the plant was in full operation. The regression yielded the following estimated cost function:
Maintenance Cost = $60 + $0.25/MH
The regression analysis also generated a coefficient of determination (R2), or goodness of fit, of 0.85. Which of the following statements regarding this regression analysis is appropriate?
- A. The $0.25 component is the slope coefficient of the cost estimate and represents the average variable maintenance cost per machine hour.
- B. This regression can be used to determine the maintenance cost for any period at any activity level by substituting the machine hours in the equation.
- C. The coefficient of determination of R2 = 0.85 indicates that the goodness of fit is poor because the value is close to the maximum value of one.
- D. The $60 component represents the best estimate of fixed maintenance costs for the company in a shutdown situation.
Answer: A
NEW QUESTION 274
Which of the following is an effective approach for internal auditors to take to improve collaboration with audit clients during an engagement?
1. Obtain control concerns from the client before the audit begins so the internal auditor can tailor the scope accordingly.
2. Discuss the engagement plan with the client so the client can understand the reasoning behind the approach.
3. Review test criteria and procedures where the client expresses concerns about the type of tests to be conducted.
4. Provide all observations at the end of the audit to ensure the client is in agreement with the facts before publishing the report.
- A. 1 and 2 only
- B. 3 and 4 only
- C. 2 and 3 only
- D. 1 and 4 only
Answer: A
Explanation:
Section: Volume E
NEW QUESTION 275
The chief audit executive (CAE) notes that management has adopted the option of not takingaction on an audit issue involving a sizeable risk which has been accepted in the past.Which would be an appropriate action by the CAE?
- A. Report the situation to the board for immediate resolution.
- B. Discuss the matter with management to determine a resolution.
- C. Close the issue by noting that follow-up will be completed as part of the next engagement.
- D. Accept management's decision as the same risk has been accepted in the past.
Answer: B
NEW QUESTION 276
The newly appointed chief audit executive (CAE) of a large multinational corporation, with seasoned internal audit departments located around the world, is reviewing responsibilities for engagement reports.
According to IIA guidance, which of the following statements is true?
- A. The CAE may delegate responsibility for reviewing, approving and signing engagement reports, but should review the reports after they are issued.
- B. The CAE is required to review, approve, and sign all regulatory compliance engagement reports only
- C. The CAE is required to review, approve, and sign every engagement report.
- D. The internal audit charter must identify authorized signers of engagement reports.
Answer: A
NEW QUESTION 277
Which of the following represents appropriate evidence of supervisory review of engagement workpapers?
I. A supervisor's initials on each workpaper.
II. An engagement workpaper review checklist.
III. A memorandum specifying the nature, extent, and results of the supervisory review of workpapers.
IV. Performance appraisals that assess the quality of workpapers prepared by auditors.
- A. I, III, and IV only
- B. I, II, III, and IV.
- C. II and IV only
- D. I, II, and III only
Answer: D
Explanation:
Section: Volume B
Explanation/Reference:
NEW QUESTION 278
Access control software on an organization's mainframe computer records detailed information concerning both successful and unsuccessful log-on attempts to applications. Which of the following audit tools would be best suited to review the access information that has been recorded?
- A. Integrated test facility.
- B. Test data.
- C. Flowcharting.
- D. Generalized audit software.
Answer: D
Explanation:
Section: Volume A
NEW QUESTION 279
When creating the internal audit plan, the chief audit executive should prioritize engagements based primarily on which of the following?
- A. The longest interval since the last examination of each audit universe item.
- B. Requests from senior management and the board.
- C. The auditable areas required by regulatory agencies.
- D. The last available risk assessment.
Answer: D
NEW QUESTION 280
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