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Internal Audit Final Exam Prep
Terms in this set (30)
In engagement planning, internal auditors should review all relevant information. Which of the following sources of information would most likely help identify suspected violations of environmental regulations?
Review of correspondence the entity has conducted with governmental agencies
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
perpetual inventory file
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
Listens with acceptance, empathy, and intensity
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
Document the supervisors answers noting the nature of the nonverbal communications
Which of the following is NOT an advantage of sending an internal control questionnaire prior to an audit engagement?
The engagement client will respond only to the questions asked, without volunteering additional information
Tolerating silence, asking open-ended questions, and paraphrasing are three aids to more effective
Reliable information is
Competent and the best attainable through the use of appropriate engagement techniques
Assume the internal auditor did not find a satisfactory explanation for the results of the analytical procedures performed and has conducted the appropriate follow-up procedures. The engagement in this area is otherwise complete. Which of the following would be the most appropriate action to take?
Report the observations, as they are, to management and recommend an investigation for possible fraud
Which of the following procedures most likely provides an internal auditor with the most assurance about the effectiveness of the operation of a control?
Observation of the engagement client's personnel
Internal auditors often include summaries within their workpapers. Which of the following best describes the purpose of such summaries?
Summaries distill the most useful information from several workpapers into a more usable form.
When conducting audit follow-up of a finding related to cash management routines, which of the following does NOT need to be considered?
Inherent risk has been eliminated as a result of resolution of the condition
Which of the following best defines an internal auditor's opinion expressed following an assurance engagement?
The internal auditor's professional judgment about the situation that was reviewed
The internal audit activity has communicated its findings in an assurance engagement about significant risks in an organization's billing and payments department. Which of the following is the appropriate process for following up?
The CAE established and maintains a system to monitor the disposition of results communicated to management
During a consulting engagement involving the development of a new accounts payable system, an internal auditor identified a control weakness. Although the weakness was reported to the manager of the systems development project, the manager decided to accept the risk because, in the manager's opinion, the risk was not significant. Six months after the implementation of the new system, the disbursements process was audited by another internal auditor who determined that the control weakness has impacted payment processing. The auditor reviewing the disbursements process should do which of the following?
Report the control weakness to management and the audit committee
Which of the following is NOT included in the statement of scope in an engagement final communication?
Word selection can have an impact on the recipient when presenting an engagement communication in either oral or written form. In a oral or written presentation in which the internal auditor's objective is to persuade an individual to accept the recommendations, using words with strong or emotional connotation rather than words with low connotation
May misfire quickly, moving the recipient away from the internal auditor's recommendation
Which of the following should NOT be one of the primary reasons why an internal auditor may communicate sensitive information outside the normal chain of command?
The internal auditor does not agree with how the board or directors or management may correct the problem
The most important message for the internal auditor to convey to the senior management is
The project is expected to be completed on time and within budget
Final engagement communications should, at a minimum, contain the purpose, scope, and results of the engagement. Engagement observations and recommendations should be based on four attributes: criteria, condition, cause, and effect. The cause can best be described as
Reason for the difference between the expected and actual conditions
The following data were gathered during an internal auditor's investigation of the reason for a material increase in bad debts expense. In preparing an engagement communication, each of the items might be classified as criteria, condition, cause, effect, or background information. The condition attribute is best illustrated by items numbered
Engagement procedures showed that sales personnel regularly disregard credit guidelines when dealing with established customers. To reduce costs, the use of outside credit reports was suspended on several occasions,. Because several staff positions in the credit department were eliminated to reduce costs, some new accounts have received only cursory review.
An internal auditor reconciles the total of the accounts receivable subsidiary ledger to the general ledger control account, as of October 31. By this procedure, the auditor would be most likely to learn of which of the following?
An opening balance in a subsidiary ledger account was improperly carried forward from the previous accounting period
An internal auditor analyzes repairs and maintenance accounts primarily to obtain evidence in support of the classification assertion that all
Expenditures for property and equipment have not been charged to expense
Level of productions stoppages over the past year at a large laminating business were abnormally high dure to machine malfunctions. Would it be appropriate for the internal auditing function to develop a survey examining attitudes toward line operations, rotation of work zones, training, maintenance schedule, etc., for the machine operators to complete?
Yes, the examined areas are relevant to the malfunctions
The audit committee has raised a few issues that the internal audit activity will examine during an operational audit for the current year. When performing the preliminary survey, which of the following is NOT an appropriate technique?
Determining the largest risk of financial statement misstatement
In the confirmation of accounts receivable, the auditor would most likely
Request confirmation of a sample of the inactive accounts
Which of the following engagement procedures, performed by the internal auditor, is most likely to detect this fraud?
Performing a trend analysis of printing supplies expenses for a 2-year period
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 detectng the existence of such a fraud?
Take a sample that includes all large donors for the past 3 years and a statistical sample of others and request a confirmation of total contributions made to the organization or to affiliated organizations
Which of the following is NOT a requirement of the audit work plan of the internal audit activity?
To include the basics of the engagement work program
In assessing risks of material misstatement for purchases, an internal auditor vouches a sample of entries in the voucher register to the supporting documents. Which assertion would this test of controls most likely support?
An internal auditor of an organization in the process of acquiring another organizaton has been requested to verify that cash for the organization being acquired is properly stated. The engagement technique that will yield the most persuasive piece of information is
Obtaining standard bank confirmations.
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