The following transactions and events occurred during the year:
- $300,000 of raw materials were purchased, of which $20,000 were returned because of defects
- $600,000 of direct labor costs were incurred.
- S750.000 of manufacturing overhead costs were incurred.
What is the organization's cost of goods sold for the year?
The process of scenario planning begins with which of the following steps?
Which of the following price adjustment strategies encourages prompt payment?
Which of the following factors would reduce dissatisfaction for a management trainee but would not particularly motivate the trainee?
Which of the following would not impair the objectivity of internal auditor?
Which of the following engagement observations would provide the least motivation for management to amend or replace an existing cost accounting system?
Which of the following is a disadvantage of selecting a commercial software package rather than developing an application internally?
Which of the following is a characteristic of just-in-time inventory management systems?
What must be monitored in order to manage risk of consumer product inventory obsolescence?
1. Inventory balances.
2. Market share forecasts.
3. Sales returns.
4. Sales trends.
Which of the following statements is true regarding the resolution of interpersonal conflict?
A supervisor receives a complaint from an employee who is frustrated about having to learn a new software program. The supervisor responds that the new software will enable the employee to work more efficiently and with greater accuracy. This response is an example of:
An organization has recorded the following profit and expenses:
Profit before interest and tax
$200,000
Sales
$2,300,000
Purchases of materials
$700,000
Interest expenses
$30,000
If the value-added tax (VAT) rate is 20 percent and the corporate tax rate is 30 percent, which of the following is the amount of VAT that the organization has to pay?
In an organization where enterprise risk management practices are mature, which of the following is a core internal audit role?
Organization X owns a 38 percent equity stake in Organization Y. Which of the following statements is true regarding the financial treatment for this relationship?
Unsecured loans are loans:
A global business organization is selecting managers to post to various international (expatriate) assignments. In the screening process, which of the following traits would be required to make a manager a successful expatriate?
1. Superior technical competence.
2. Willingness to attempt to communicate in a foreign language.
3. Ability to empathize with other people.
In which type of business environment are price cutting strategies and franchising strategies most appropriate?
Which of the following is not included in the process of user authentication?
Which of the following are typical audit considerations for a review of authentication?
1. Authentication policies and evaluation of controls transactions.
2. Management of passwords, independent reconciliation, and audit trail.
3. Control self-assessment tools used by management.
4. Independent verification of data integrity and accuracy.
Which of the following statements accurately describes the responsibility of the internal audit activity (IAA) regarding IT governance?
1. The IAA does not have any responsibility because IT governance is the responsibility of the board and senior management of the organization.
2. The IAA must assess whether the IT governance of the organization supports the organization’s strategies and objectives.
3. The IAA may assess whether the IT governance of the organization supports the organization’s strategies and objectives.
4. The IAA may accept requests from management to perform advisory services regarding how the IT governance of the organization supports the organization’s strategies and objectives.
Which of the following is true regarding the COSO enterprise risk management framework?
An organization decided to install a motion detection system in its warehouse to protect against after-hours theft. According to the COSO enterprise risk management framework, which of the following best describes this risk management strategy?
Which of the following statements is true regarding a bring-your-own-device (BYOD) environment?
According to IIA guidance, which of the following corporate social responsibility (CSR) evaluation activities may be performed by the internal audit activity?
1. Consult on CSR program design and implementation.
2. Serve as an advisor on CSR governance and risk management.
3. Review third parties for contractual compliance with CSR terms.
4. Identify and mitigate risks to help meet the CSR program objectives.
According to IIA guidance on IT. which of the following plans would pair the identification of critical business processes with recovery time objectives?
An organization is considering mirroring the customer data for one regional center at another center. A disadvantage of such an arrangement would be:
Which of the following is a key characteristic of a zero-based budget?
Which of the following is not a barrier to effective communication?
Which is the least effective form of risk management?
A multinational organization has multiple divisions that sell their products internally to other divisions. When selling internally, which of the following transfer prices would lead to the best decisions for the organization?
Which of the following is not a primary reason for outsourcing a portion of the internal audit activity?
According to IIA guidance, which of the following factors should the auditor in charge consider when determining the resource requirements for an audit engagement?
A large investment organization hired a chief risk officer (CRO) to be responsible for the organization's risk management processes. Which of the following people should prioritize risks to be used for the audit plan?
According to IIA guidance,which of the following is true about the supervising internal auditor's review notes?
• They are discussed with management prior to finalizing the audit.
• They may be discarded after working papers are amended as appropriate.
• They are created by the auditor to support her fieldwork in case of questions.
• They are not required to support observations issued in the audit report.
A chief audit executive (CAE) received a detailed internal report of senior management's internal control assessment. Which of the following subsequent actions by the CAE would provide the greatest assurance over management's assertions?
Which of the following would most likely cause an internal auditor to consider adding fraud work steps to the audit program?
An internal auditor is conducting an assessment of the purchasing department. She has worked the full amount of hours budgeted for the engagement; however, the audit objectives are not yet complete. According to IIA guidance, which of the following are appropriate options available to the chief audit executive?
1. Allow the auditor to decide whether to extend the audit engagement.
2. Determine whether the work already completed is sufficient to conclude the engagement.
3. Provide the auditor feedback on areas of improvement for future engagements.
4. Provide the auditor with instructions and directions to complete the audit.
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.
Which of the following factors would the auditor in charge be least likely to consider when assigning tasks to audit team members for an engagement?
Which of the following conditions are necessary for successful change management?
1. Decisions and necessary actions are taken promptly.
2. The traditions of the organization are respected.
3. Changes result in improvement or reform.
4. Internal and external communications are controlled.
Due to a recent system upgrade, an audit is planned to test the payroll process. Which of the following audit objectives would be most important to prevent fraud?
Which of the followings statements describes a best practice regarding assurance engagement communication activities?
It is close to the fiscal year end for a government agency, and the chief audit executive (CAE) has the following items to submit to either the board or the chief executive officer (CEO) for approval. According to IIA guidance, which of the following items should be submitted only to the CEO?
According to IIA guidance, which of the following is true regarding audit supervision?
1. Supervision should be performed throughout the planning, examination, evaluation, communication, and follow-up stages of the audit engagement.
2. Supervision should extend to training, time reporting, and expense control, as well as administrative matters.
3. Supervision should include review of engagement workpapers, with documented evidence of the review.
During a fraud interview, it was discovered that unquestioned authority enabled a vice president to steal funds from the organization. Which of the following best describes this condition?
Which of the following is not a primary purpose for conducting a walk-through during the initial stages of an assurance engagement?
For which of the following fraud engagement activities would it be most appropriate to involve a forensic auditor?
Which of the following statements is true pertaining to interviewing a fraud suspect?
1. Information gathered can be subjective as well as objective to be useful.
2. The primary objective is to obtain a voluntary written confession.
3. The interviewer is likely to begin the interview with open-ended questions.
4. Video recordings always should be used to provide the highest quality evidence.
The board has asked the internal audit activity (IAA) to be involved in the organization's enterprise risk management process. Which of the following activities is appropriate for IAA to perform without safeguards?
The chief audit executive (CAE) of a small internal audit activity (IAA) plans to test conformance with the Standards through a quality assurance review. According to the Standards, which of the following are acceptable practice for this review?
1. Use an external service provider.
2. Conduct a self-assessment with independent validation.
3. Arrange for a review by qualified employees outside of the IAA.
4. Arrange for reciprocal peer review with another CAE.
During an assurance engagement, an internal auditor noted that the time staff spent accessing customer information in large Excel spreadsheets could be reduced significantly through the use of macros. The auditor would like to train staff on how to use the macros. Which of the following is the most appropriate course of action for the internal auditor to take?
Which of the following is not a direct benefit of control self-assessment (CSA)?
Which of the following statements is false regarding audit criteria?
Which of the following is least likely to help ensure that risk is considered in a work program?
When establishing a quality assurance and improvement program, the chief audit executive should ensure the program is designed to accomplish which of the following objectives?
1. Add value.
2. Improve operations.
3. Provide assurance that the internal audit activity conforms with the Standards.
4. Provide assurance that the internal audit activity conforms with the IIA Code of Ethics.
New environmental regulations require the board to certify that the organization's reported pollutant emissions data is accurate. The chief audit executive (CAE) is planning an audit to provide assurance over the organization's compliance with the environmental regulations. Which of the following groups or individuals is most important for the CAE to consult to determine the scope of the audit?
According to IIA guidance, which of the following statements best justifies a chief audit executive's request for external consultants to complement internal audit activity (IAA) resources?
After finalizing an assurance engagement concerning safety operations in the oil mining process, the audit team concluded that no key controls were compromised. However, some opportunities for improvement were noted. Which of the following would be the most appropriate way for the chief audit executive (CAE) to report these results?
An organization has a health and safety division that conducts audits to meet regulatory requirements. The chief health and safety officer reports directly to the CEO. Which of the following describes an appropriate role for the chief audit executive (CAE) with regard to the organization's health and safety program?
Which of the following best illustrates the primary focus of a risk-based approach to control self-assessment?
A manufacturing line supervisor joins the internal audit activity for a two-year rotational job assignment and is assigned to an accounts receivable audit. With regard to this assignment, which of the following should be the primary concern of the audit manager?
Which of the following actions best demonstrates that an internal auditor is exercising due professional care?
What is the purpose of a secondary control?
An internal auditor is performing analytical reviews as part of an audit of a supermarket's merchandising department. Because the economy has declined since midyear, the auditor can expect to encounter which of the following?
Which of the following best explains why integrity is a necessary personal quality for internal auditors at all levels?
Non-statistical sampling does not require which of the following?
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 headquarters-based internal auditor has been sent to a major overseas subsidiary to conduct various engagements. Initially, the internal auditor spends time to become familiar with local customs and organization's practices while embarking on the first engagement. Which of the following competencies does the internal auditor exercise?
With regard To IT governance, which of the following is the most effective and appropriate role for the internal audit activity?
To fill a critical vacancy, an internal auditor is assigned temporarily to a nonaudit role in the purchasing department, where she worked previously before joining the internal audit activity. According to IIA guidance, which of the following statements is true regarding these circumstances?
Which of the following activities should the chief audit executive perform to ensure compliance with an organization's code of conduct?
According to IIA guidance, which of the following is least compliant with the requirements regarding an internal auditor's need for objectivity?
According to IIA guidance, which of the following are considerations of due professional care when an internal auditor conducts a formal consulting engagement?
1. The complexity of the work required.
2. The needs and expectations of the client.
3. The potential value of the engagement compared to the effort.
4. Information regarding assumptions and procedures to be employed.
Which of the following is an example of collusion?
Which of the following situations is most likely to impair internal audit objectivity?
Which of the following is a common type of payroll fraud?
Which of the following controls could an internal auditor reasonably conclude is effective by observing the physical controls of a large server room?
Which of the following responsibilities would fall under the role of the chief audit executive, rather than internal audit staff or the audit manager?
An auditor identifies three errors in the sample of 25 entries selected for review (a 12 percent error rate). Based on this result, the auditor assumes that approximately 59 of the total population of 492 entries are incorrect. To reach this assumption, the auditor has used a technique known as which of the following?
The chief audit executive (CAE) is planning to conduct an internal assessment of the internal audit activity (IAA). Part of this assessment will include benchmarking. According to IIA guidance, which of the following qualitative metrics would be appropriate for the CAE to use?
1. Average client customer satisfaction score for a given year.
2. Client survey comments on how to improve the IAA.
3. Auditor interviews once an audit has been completed.
4. Percentage of audits completed within 90 days.
A fraud investigation was completed by management, and a proven fraud was communicated to relevant authorities. According to MA guidance, which of the following roles would be most appropriate for the internal audit activity to undertake after the investigation?
Which of the following is an example of a risk management avoidance response?
Which of the following statements is true about The IIA Global Internal Audit Competency Framework?
The security department uncovered what appears to be a complex fraud in the accounting department. The CEO has requested the internal audit activity to investigate the fraud. If the internal audit staff lacks the expertise to conduct the investigation, how should the chief audit executive proceed?
Which of the following options is the most cost-effective and efficient way for internal auditors to keep current with the latest developments in the internal audit profession?
Which of the following is the best way to detect fraud?
A large trucking organization wants to reduce traffic accidents by improving its system of internal controls.
Which of the following controls is correctly classified?
1. Review of speeding violations to identify repetitive locations and drivers is an example of a preventive control.
2. Defensive driver training is an example of a directive control.
3. The installation of tracking devices in delivery vehicles is an example of a corrective control.
4. Providing a vehicle driver handbook is an example of a detective control.
A chief audit executive (CAE) is selecting an internal audit team to perform an audit engagement that requires a high level of knowledge in the areas of finance, investment portfolio management, and taxation. If neither the CAE nor the existing internal audit staff possess the required knowledge, which of the following actions should the CAE take?
Which of the following scenarios best illustrates a rationalization as the root cause of potential fraud?
Which of the following is an example of a management control technique?