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NEW QUESTION # 134
An internal auditor is using a spreadsheet application to review a cash flow forecast prepared by management.
Which of the following correctly identifies the type of evidence this information represents?
- A. Sufficient, circumstantial evidence of the future solvency of the organization.
- B. Sufficient, analytical evidence of the cash flow position at a given point of time in the future.
- C. Competent, corroborative evidence of future working capital requirements.
- D. Competent, documentary evidence of future cash flow changes within the organization.
Answer: D
NEW QUESTION # 135
According to COSO, which of the following is not considered one of the components of an organization's internal environment?
- A. Framework to plan, execute and monitor activities.
- B. Knowledge and skills needed to perform activities.
- C. Authority and responsibility to resolve issues.
- D. Integrated responses to multiple risks.
Answer: D
NEW QUESTION # 136
A chief audit executive (CAE) reports functionally to the CEO and administratively to the chief financial officer, both of whom serve on the company's board of directors. According to IIA guidance, which of the following would offer the greatest protection for the independence of the internal audit activity?
- A. Move the CAE's functional reporting to an executive who is not on the board.
- B. Obtain full board approval of the internal audit activity's annual audit plan.
- C. Move the CAE's functional reporting to the audit committee.
- D. Appoint the CAE as a member of the board.
Answer: C
NEW QUESTION # 137
When an internal auditor applies due professional care to perform an assurance engagement, which of the following must she consider?
1. Findings of the last audit engagement performed.
2. Probability of significant errors, irregularities, or noncompliance.
3. Extent of work needed to achieve engagement objectives.
4. Cost of the engagement versus the potential benefits.
- A. 2, 3, and 4 only
- B. 1 and 4 only
- C. 1, 2, 3, and 4
- D. 2 and 3 only
Answer: A
NEW QUESTION # 138
An internal audit activity (IAA) provided assurance services for an activity it was responsible for during the preceding year.
As a result, which IIA Code of Ethics principle is presumed to be impaired?
- A. Competence.
- B. Objectivity.
- C. Independence.
- D. Flexibility.
Answer: B
NEW QUESTION # 139
According to IIA guidance, which of the following statements is true regarding the reporting of results from an external quality assessment of the internal audit activity?
- A. The external assessment results are communicated upon completion to senior management and the board, but action plans for recommended improvements do not have to be reported.
- B. The requirements for reporting quality assessment results are the same for external assessments and self-assessments with independent external validation.
- C. The external assessment results are reported upon completion in confidence directly to the board, and senior management is advised only of the recommendations and improvement action plans.
- D. The results of self-assessments with independent external validation are shared with the board upon completion, and monitoring of recommended improvements must be reported monthly.
Answer: D
NEW QUESTION # 140
Sometimes, internal audit staff may partner with operating managers to rank risks. Which of the following outcomes may be the most beneficial aspects of this strategy?
1. Reappraising risks levels.
2. Providing accurate information to management.
3. Marketing the internal audit activity.
4. Planning safeguards for assets in high-risk areas.
- A. 1 and 2.
- B. 1 and 3.
- C. 2 and 3.
- D. 3 and 4.
Answer: B
NEW QUESTION # 141
Which of the following would not be a red flag for fraud?
- A. New employees occasionally fail to meet established project deadlines due to staffing shortages.
- B. A manager has bragged about multiple extravagant vacations taken within the last year, which are excessive relative to the manager's salary.
- C. Several recent, large expenditures to a new vendor have not been documented.
- D. A weak control environment has been accepted by management to encourage creativity.
Answer: A
NEW QUESTION # 142
An internal audit charter should do which of the following?
- A. Outline the schedule of future audits.
- B. Establish the size of the internal audit activity.
- C. Communicate the internal audit activity's goals.
- D. Define the scope of internal audit activities.
Answer: D
NEW QUESTION # 143
The manager for an organization's accounts payable department resigned her post in that capacity. Three months later, she was recruited to the internal audit activity and has been working with the audit team for the last eight months. Which of the following assignments would the newly hired internal auditor be able to execute without any impairments to independence or objectivity?
- A. A consulting engagement related to a new accounts payable optimization initiative.
- B. A review of the employees' sports club finances, which are overseen by the chief audit executive.
- C. An assurance review for a sales program on which she previously provided consultation.
- D. An operations audit of the accounts payable department.
Answer: B
NEW QUESTION # 144
An internal auditor in a small broadcasting organization was assigned to review the revenue collection process.
The auditor discovered that some checks from three customers were never recorded in the organization's financial records. Which of the following documents would be the least useful for the auditor to verify the finding?
- A. Bank statements.
- B. Customer confirmation letters.
- C. Copies of sales invoices.
- D. Copies of deposit slips.
Answer: D
NEW QUESTION # 145
If appropriate safeguards exist, which of the following is considered a legitimate internal audit role within risk management at an organization?
- A. Making decisions on risk responses.
- B. Imposing risk management processes.
- C. Taking accountability for risk management.
- D. Providing consolidated reporting on risks.
Answer: D
NEW QUESTION # 146
Which of the following is not one of the 10 core competencies identified in the IIA Competency Framework?
- A. Internal audit delivery.
- B. Governance, risk, and control.
- C. Business acumen.
- D. Performance management.
Answer: D
NEW QUESTION # 147
Which of the following must be in existence as a precondition to developing an effective system of internal controls?
- A. A monitoring process.
- B. An information and communication process.
- C. A risk assessment process.
- D. A strategic objective-setting process.
Answer: C
NEW QUESTION # 148
During an account receivables audit, an internal auditor found a significant number of input errors resulting in a $500, 000 balance understatement.
Which of the following is the most important question the internal auditor should ask to develop an appropriate recommendation for this finding?
- A. Who?
- B. When?
- C. Why?
- D. How?
Answer: C
NEW QUESTION # 149
In the area of business acumen, which of the following competencies would be the sole responsibility of an internal audit staff member?
- A. Assessing how IT contributes to organization objectives, risks, and relevance to audit.
- B. Maintaining technical aspects of accounting standards and reporting processes.
- C. Understanding regulatory and legal framework and assessing its relevance.
- D. Maintaining industry-specific knowledge appropriate to the organization.
Answer: C
NEW QUESTION # 150
According to IIA guidance, which of the following statements is true?
- A. Risks in IT processes are best mitigated by individual controls.
- B. The overall focus of the framework is on significant controls in all critical IT applications.
- C. IT risks and related controls are operational and best identified using a bottom-up approach.
- D. Control process risks are found at multiple layers of the IT environment.
Answer: D
NEW QUESTION # 151
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