Internal Auditing Final Questions
Which of these statements should be in the condition section of the communication?A. VI only.B. IV only.C. I only. D. VII only.
The effect attribute is best illustrated by items numberedA. 1, 8, and 9.B. 3, 4, and 12.C. 5, 6, and 7. D. 2, 10, and 11.
For a preliminary meeting with a client, the internal auditor has developed an agenda that includes, among other items, the topics for discussion listed below. Which is (are) appropriate for this meeting?1.The names of internal auditors present. 2.The na
A major deficiency in paragraph #7 related to the completeness of the engagement communication isA. No separate section adequately discusses the risks associated with the observation.B. The condition for the observation is not clearly explained. C. The
B. The condition for the observation is not clearly explained.
A relatively new internal auditor is completing a final engagement communication. The communication should most appropriately be signed by theA. Internal auditor because of a greater level of detailed knowledge of the report.B. Chief audit executive. C.
Providing useful and timely information and promoting improvements in operations are goals of internal auditors. To accomplish these goals in their engagement communication, they should provide
B. Engagement communications that meet the expectations and perceptions of both operational and senior management.
The content and format of engagement communications may vary. However, according to the Standards, a necessary element is statement ofA. Documentation of previous oral communications.B. The status of observations from prior engagement communications. C.
C. Engagement objectives.
The internal audit activity for a chain of retail stores recently concluded an engagement to evaluate sales adjustments in all stores in the Southeast region. The engagement revealed that several stores are costing the organization substantial sums in dup
C. The final engagement communication was not timely.
You are conducting an engagement to evaluate the organization's marketing effort. You agreed to keep the marketing vice president informed of your progress on a regular basis. What method should be used for those progress reports?
D. Oral or written interim reports.
Which of the following is false with respect to the use of interim engagement communications? Interim engagement communicationsA. Are used to communicate information that requires immediate attention. B. Eliminate the need for issuing final engagement co
B. Eliminate the need for issuing final engagement communications.
A major deficiency in paragraph #8 is thatA. The observations were not discussed with division management before being presented to upper management.B. The nature of the follow-up action is inappropriate. C. The cost savings mentioned are not supported
D. All of the answers are correct.
Assume with regard to item B, the vice president asks the loan committee to review the loans on an after-the-fact basis. Assume further, upon this subsequent review, the loan committee approves the loans on the after-the-fact basis. Which of the following
Which of these statements should be in the criteria section of the communication?A. II only.B. III and IV only.C. V only. D. III only.
When an internal auditor is communicating with engagement clients, both situational factors and message characteristics can damage the communication process. An internal auditor has only limited control over situational factors but has substantial control
During a bank audit, internal auditors discover that a loan officer approved loans to related but separate organizations in violation of regulatory policies. The loan officer stated that the approvals were oversights and would not occur again. However, th
D. Inform management of the conflict of interest and the violation of regulatory requirements and suggest further investigation.
According to the Standards, when should a signed report be issued?A. At the conclusion of an engagement.B. Only if required by the particular engagement.C. Whenever an opinion is expressed. D. At predetermined stages as the engagement progresses.
A. At the conclusion of an engagement.
Internal audit activity policy requires that final engagement communications not be issued without a management response. An engagement with significant observations is complete except for management's response. Evaluate the following courses of action an
A. Issue an interim engagement communication regarding the important issues noted.
Which of the following best defines an internal auditor's opinion expressed following an assurance engagement?A. The internal auditor's professional judgment about the situation that was reviewed.B. Recommendations for corrective action. C. A summary of
A. The internal auditor's professional judgment about the situation that was reviewed.
The primary reason for having written formal audit reports is toA. Provide an opportunity for engagement client response.B. Document the corrective actions required of senior management. C. Provide a formal means by which the external auditor assesses p
D. Record observations and recommended courses of action.
The condition attribute is best illustrated by items numberedA. 1, 8, and 9.B. 3, 4, and 12.C. 2, 10, and 11. D. 5, 6, and 7.
Regarding item D, which of the following is true?1.The deviation rate is under 4%; therefore, the observation need not be reported to management and the board. 2.The internal auditor should review appropriate regulations and possibly obtain legal counsel
The objectives of an engagement communication are to inform and to influence. Whether these objectives are met depends on the clarity of the writing. Which of the following principles of communication clarity was violated in the engagement communication?
D. All of the answers are correct.
In which of the following situations have the internal auditors appropriately transmitted their engagement communication?
During a review of purchasing operations, an internal auditor finds that current procedures differ markedly from stated organizational procedures. However, the internal auditor concludes that the procedures currently used represent an increase in efficien
B. Report the change and suggest that the change in procedures be documented.
All of the following are required communications by the chief audit executive (CAE) to senior management and the board exceptA. The internal audit activity's plans and resource requirements.B. Significant interim changes in plans and resources. C. Effec
D. Results of analysis into staffing needs.
Recent criticism of an internal audit activity suggested that engagement coverage was not providing adequate feedback to senior management on the processes used in the organization's key lines of business. The problem was further defined as lack of feedba
C. Planning and communicating.
Which of the following is most appropriate for inclusion in the summary of a final engagement communication?A. A concise statement of engagement observations.B. Reference to areas not covered by the engagement. C. Engagement client responses to recommen
A. A concise statement of engagement observations.
Word selection can have an impact on the recipient when presenting an engagement communication in either written or oral form. In a written or oral presentation in which the internal auditor's objective is to persuade an individual to accept the recommend
D. May misfire quickly, moving the recipient away from the internal auditor's recommendation.
Which internal audit planning tool is general in nature and is used to ensure adequate engagement coverage over time?A. The audit plan.B. The internal audit activity's budget.C. The internal audit activity's charter. D. The engagement work program.
Engagement field work has identified a number of significant observations. Additional tests from the original engagement work program still have to be performed, but data are not readily available. Evaluate the following and select the best alternative.
C. Issue an interim engagement communication to management regarding the negative observations noted.
An internal audit activity is conducting an engagement to evaluate the payroll and accounts receivable departments. Significant problems related to the approval of overtime have been noted. While the engagement is still in process, which of the following
D. An oral communication.
The internal auditor completed work on a segment of the engagement work program. As a result, the internal auditor determined that a modification of the organization's distribution procedures is required. The engagement client agreed and has implemented r
C. Indicate in the final engagement communication that the client determined and implemented corrective action.
As a result of an engagement performed at a bank, the internal auditor included the following observation in the final engagement communication:
D. Criteria or standards.
An annual summary report of completed engagement work submitted to senior management and the board by the chief audit executive shouldA. Inform management of the scope of proposed work for the following year. B. Emphasize the number of deficiency observa
C. Describe the extent to which the internal audit activity has completed its approved audit plan.
Which of the following should be identified as a deficiency by an engagement supervisor who is reviewing working papers?A. A memorandum recorded in the working papers explained why the time budget for a part of the engagement was exceeded. B. A memorandu
C. A draft communication concerning an engagement observation recorded in the working papers omitted the criteria used for evaluation.
The best means for the internal audit activity to determine whether its goal of implementing broader coverage of functional activities has been met is throughA. Implementation of a quality assurance program. B. Accumulation of engagement observations by
D. Comparison of the approved audit plan with actual engagement activity.
With the final report on an operations audit due in three weeks, the internal auditor finds a violation of fire safety codes. Which of the following describes the best course of action the auditor could take?A. Notify the local fire department. B. Alert
B. Alert responsible management immediately in a written or an oral interim report.
A governmental agency, constrained by scarce internal audit and human resources, wishes to know the status of its program for licensing automobiles. In particular, management is concerned about the possibility of
C. Send a memorandum communication to the executive director and other concerned parties summarizing the preliminary survey results and indicating that the engagement has been canceled.
The most appropriate use of an oral engagement communication is to communicateA. Sensitive matters to management when the chief audit executive does not want to commit them to writing.B. Matters that are not material. C. Complex matters to operating man
D. Conditions that demand immediate action.
A chief audit executive's performance report shouldA. Report the weekly activities of the individual internal auditors.B. List the material engagement observations of major engagements.C. List uncorrected reported conditions. D. Compare engagements com
D. Compare engagements completed with engagements planned.
An internal auditor performing a consulting engagement has observed employees routinely taking home office supplies with no attempt made at concealment. The auditor consulted the firm's policies and procedures manual and found no reference to personal use
B. Recommend adoption of a policy about personal use of office supplies.
The cause attribute is best illustrated by items numberedA. 1, 8, and 9.B. 2, 10, and 11.C. 5, 6, and 7. D. 3, 4, and 12.
An internal auditor has completed an engagement to review an organization's activities and is ready to issue a final engagement communication. However, the engagement client disagrees with the internal auditor's conclusions. The internal auditor should
A. Issue the final engagement communication and state both the internal auditor and engagement client positions and the reasons for the disagreement.
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
B. Reason for the difference between the expected and actual conditions.
During an early phase of an extensive engagement to evaluate a manufacturer's inventory management system, an internal auditor reviewed inventory levels. During this review, the internal auditor discovered that there had been recurring stockouts for some
A. Important problem that should be included in an engagement communication.
Which of the following is not included in the statement of scope in an engagement final communication?A. Period covered by the engagement.B. Engagement objectives.C. Nature and extent of the work performed. D. Activities not reviewed.
B. Engagement objectives.
Which of the following is an appropriate responsibility of the board?A. Performing a review of the procurement function of the organization.B. Recommending the assignment of specific internal audit staff members for specific engagements. C. Reviewing th
C. Reviewing the internal audit activity's engagement work schedule submitted by the chief audit executive.
A major deficiency in paragraph #5 related to the completeness of the engagement communication is thatA. It does not adequately describe the potential effect of the conditions noted. B. The recommendations are not required and are not appropriate given t
C. It does not contain criteria by which the concept of "excessive inventory" is judged.
An excerpt from an engagement observation indicates that travel advances exceeded prescribed maximum amounts. Organizational policy provides travel funds to authorized employees for travel. Advances are not to exceed 45 days of anticipated expenses. Organ
B. Advance procedures do not require specific justification.
During an engagement involving the receiving section of the purchasing division, the internal auditor discovers that a receiving problem might be the result of procedures followed in the procurement section. The internal audit activity's management agrees
D. A written interim communication to the involved supervisor and the same distribution as the original correspondence scheduling the engagement.
An internal auditor has just completed an engagement and is in the process of preparing the final engagement communication. The observations in the final engagement communication should includeA. Statements of opinion about the cause of an observation. B
C. Pertinent factual statements concerning the control weaknesses uncovered during the course of the engagement.
When a final engagement communication contains a significant error, the Standards require the chief audit executive toA. Communicate corrected information to all those who might have relied on the original communication. B. Communicate corrected informat
B. Communicate corrected information to all individuals who received the original communication.
Which of the following is not a major purpose of an engagement communication?A. Assign responsibility.B. Get results.C. Persuade. D. Inform.
A. Assign responsibility.
A final communication issued by an internal auditor following an assurance engagement should contain an expression of opinion whenA. The area of the engagement is the financial statements. B. An opinion will improve communications with the readers of the
B. An opinion will improve communications with the readers of the communication.
Which of the following is the most appropriate method of reporting disagreement between the internal auditor and the engagement client concerning engagement observations and recommendations?
B. State both positions and identify the reasons for the disagreement.
Regarding the engagement observation concerning an advanced computing security system, what is the most appropriate course of action by the internal auditor?
A. Estimate the added cost, report it to management, and suggest that management meet with its lawyers and the outsourcer to resolve differences.
The criteria attribute is best illustrated by items numberedA. 1, 8, and 9.B. 5, 6, and 7.C. 2, 10, and 11. D. 3, 4, and 12.
While performing an operational engagement involving the firm's production cycle, an internal auditor discovers that, in the absence of specific guidelines, some engineers and buyers routinely accept vacation trips paid by certain of the firm's vendors. O
A. Formally recommend that the organization establish a code of ethics. Guidelines of acceptable conduct, within which individual decisions may be made, should be provided.
A major writing problem in paragraph #5 isA. The presentation of observations before recommendations. The engagement communication would have more impact if recommendations are made before the observations are discussed. B. The use of potentially emotion
B. The use of potentially emotional words such as "conservatism" of local management.
An internal audit activity's evaluation of sales contracts revealed that a bribe had been paid to secure a major contract. The strong possibility existed that a senior executive had authorized the bribe. Which of the following best describes the proper di
A. The chief audit executive should provide the board a copy of the report and decide whether further distribution is appropriate.
An engagement observation is worded as follows:
D. Delay the proposed vehicle purchases until the apparent excess capacity is adequately explained or absorbed.
Engagement observations and recommendations emerge by a process of comparing what should be with what is. In determining "what should be" during an engagement to review an organization's treasury function, which of the following is the least desirable cri
A. The operations of the treasury function as documented during the last engagement.
A recommendation in a final engagement communication should address what attribute?A. Statement of condition.B. Cause.C. Criteria. D. Effect.
At a minimum, the following elements should be included in final engagement communications: purpose, scope, and results. Results include observations, conclusions (opinions), recommendations, and action plans. Which of the following describes all of the e
C. Scope, conclusion, recommendation.
An internal auditor is preparing a final engagement communication to management. However, the internal auditor and the engagement client disagree about one observation that describes the client's violation of the organization's purchasing policy. The clie
C. Present the internal auditor's and client's positions in the report.
Paragraph 1: The production department has the newest production equipment available because of a fire that required the replacement of all equipment.
As an internal auditor for a multinational chemical producer, you have been assigned to an engagement at a local plant. This plant is similar in age, siting, and construction to two other plants owned by the same organization that have been recently cited
B. Issue an interim engagement communication to the appropriate levels of management.
According to the International Professional Practices Framework, which of the following is part of the minimum requirements for an engagement final communication?1.Background information.2.Purpose of the engagement.3.Engagement scope. 4.Results of the
Based on the Standards, the statement, "Competition for computer time during periods of high demand had become intense because of a planned increase in the use of the computer by operating departments," is an example ofA. Criteria.B. Condition. C. Effec
Which of the following situations is most likely to be the subject of a written interim report to the engagement client?A. The engagement program has been expanded because of indications of possible fraud. B. The auditors have decided to substitute surve
D. Open burning at a subsidiary plant poses a prospective violation of pollution regulations.
Avoiding unnecessary technical language is best associated with which quality of communication addressed in the Standards?A. Concise.B. Clear.C. Complete. D. Accurate.
A major deficiency in paragraph #6 related to the completeness of the engagement communication is that theA. Risk is presented in an overdramatic fashion.B. Cause of the problem is not defined.C. Factual support for the observation is not given. D. Rec
D. Recommendation is incomplete.
An internal auditor's final engagement communication contains the statement: "The training department expended $100,000 on the development of a training course that cannot be used." That statement is an example ofA. Effect.B. Criteria. C. Recommendation
Which of these statements should be in the effect section of the communication?A. II only.B. III only.C. VI only. D. V only.
When making a presentation to management, the internal auditor wants to report observations, conclusions, and recommendations and to stimulate action. These objectives are best accomplished byA. Delivering a lecture on the engagement results. B. Showing
C. Using slides/overheads to support a discussion of major points.
The scope section of an internal auditor's final engagement communication should identifyA. The sampling methodology employed.B. Any limitations imposed.C. Any unresolved differences with engagement clients. D. The engagement techniques used.
B. Any limitations imposed.
The chief audit executive routinely reports to the board as part of the board meeting agenda each quarter. Senior management has asked to review this presentation before each board meeting so that any issues or questions can be discussed beforehand. The C
A. Provide the report to senior management as requested and discuss any issues that may require action to be taken.
The internal auditors have completed an engagement in the purchasing department and are preparing their final report. Throughout the engagement, the auditors have shared results with the purchasing manager. Which of the following is not a goal of the fina
B. Describe the technical aspects of the methods used during the engagement.
If the internal auditor decides that the situation warrants management's immediate attention and the entire engagement will not be completed for several weeks, communication with management will probably take the form of a(n)
D. Written interim report to operating management.
According to the Standards, final engagement communications should be distributed to those members of the organization who are able to ensure that engagement results are given due consideration. For higher-level members of the organization, that requireme
An internal auditor has issued a report with no recommendations. Which of the following is an appropriate basis for this omission?A. The auditor's objectivity is compromised by making a management judgment. B. The auditor does not have enough time until
D. The auditor is not sufficiently trained to formulate recommendations for this client.
During an engagement involving sales representatives' travel expenses, the internal auditor discovered that 152 of 200 travel advances issued to sales representatives in the past year exceeded the prescribed maximum amount allowed. Which of the following
B. Travel advances are not controlled in accordance with existing policy.
Management is concerned about a recent increase in expenditures and lower profits at a division and has asked the internal audit activity to perform an operational audit of the division. Management wants the engagement completed as quickly as possible and
B. A financial audit of the division by the external auditor 1 year ago.
Which of the following statements is appropriate as a conclusion (opinion) in an internal auditing final communication of the results of an engagement to evaluate the organization's branch operations?
C. Except for the unauthorized purchases from the imprest fund, the system of internal controls over branch operations appears to be working well.
During the exit conference, the manager of the engagement client objected to a valid observation about a major control deficiency because the manager felt the observation was based upon a "biased sample and immaterial risk." What step should the internal
D. Include the engagement client's comments in the report but recommend corrective action.
Which of the following are valid reasons to submit an interim report?1.Communicating a change in engagement scope.2.Updating management on progress during a long engagement. 3.Informing management of significant matters, even if unrelated to the engagem
Bobby Fitz, CAE, believes that the internal controls over cash disbursements need major revisions. Mr. Fitz discussed this matter with senior management and was very alarmed at their acceptance of this serious risk. What action should Mr. Fitz take next?
C. Understand management's basis for accepting the risk.
Communication skills are important to internal auditors. The internal auditor should be able to effectively convey all of the following to the engagement client exceptA. The evaluations based on a preliminary survey of an engagement client. B. Recommenda
D. The risk assessment used in selecting the area for engagement investigation.
An engagement communication relating to an engagement performed at a bank categorizes observations as "deficiencies" for major problems and "other areas for improvement" for less serious problems. Which of the following excerpts is properly included under
C. The bank is incurring unnecessary postage cost by not combining certain special mailings to checking account customers with the monthly mailing of their statements.
An internal auditor has uncovered illegal acts committed by a member of senior management. Such informationA. May be disclosed in a separate communication and distributed to the board. B. May be disclosed in a separate communication and distributed to al
A. May be disclosed in a separate communication and distributed to the board.
The scope statement of an engagement communication shouldA. Describe the engagement objectives and tell the reader why the engagement was conducted.B. Identify the activities reviewed and describe the nature and extent of work performed. C. Communicate
B. Identify the activities reviewed and describe the nature and extent of work performed.
Successful communication between the internal auditor and the engagement client partially depends on achieving appropriate emphasis so that both parties are aware of the most important points in their discussion. Which of the following approaches provides
D. Graphics, repetition, and itemization.
An oral engagement communication may be most appropriate whenA. The communication is used only for internal reporting within the internal audit activity.B. Emergency action is needed. C. A summary of individual engagements is needed by higher-level mana
B. Emergency action is needed.
As the chief audit executive, you have determined that the acquisition of some expensive, state-of-the-art software for paperless working paper files will be useful. Identify the preferred method for presenting your request to senior management.
B. The effect of not obtaining the software.
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?
C. The chief audit executive (CAE) decides whether the engagement results call for monitoring and follow-up and communicates monitoring plans to management.
In beginning an engagement, an internal auditor reviews written procedures that detail segregations of responsibility adopted by management to strengthen internal controls. These written procedures should be viewed as which attribute of an observation?
To enhance communications with top management, some internal audit activities include a summary report with each written engagement communication. What information should be included in such a summary report?A. Highlights of the engagement results. B. Th
A. Highlights of the engagement results.
Recommendations should be included in audit reports toA. Ensure that problems are resolved in the manner suggested by the auditor.B. Guarantee that audit findings are addressed, regardless of cost. C. Provide management with options for addressing audit
C. Provide management with options for addressing audit findings.
Johnny Hagerts, the chief audit executive of Booster, Inc., is having a meeting with senior management about the status of the internal audit. In this meeting, Mr. Hagerts should provide assurance to management about which of the following?
B. Governance, risk management, and control.
Who reviews and approves a summary of the internal audit plan?A. The chief audit executive (CAE) only.B. Senior management and the board.C. The audit committee and the board. D. Senior management only.
B. Senior management and the board.
The manner in which data and evidence is gathered, evaluated, and summarized for presentation should be done with care and precision. Which quality of communications does this statement best describe?A. Timely.B. Objective.C. Accurate. D. Constructive
The internal auditing department of Harrison Group is submitting an annual summary to senior management for review and approval. Which of the following should be included?A. The amount of staff planned for the year. B. The type of assurance it will provi
A. The amount of staff planned for the year.
A follow-up review found that a significant internal control weakness had not been corrected. The chief audit executive (CAE) discussed this matter with senior management and was informed of management's willingness to accept the risk. The CAE should
A. Assess the reasons that senior management decided to accept the risk and inform the board of senior management's decision.
Which of the following describes the most appropriate action to be taken concerning a repeated observation of violations of company policy pertaining to competitive bidding?
D. The chief audit executive should determine whether management or the board has assumed the risk of not taking corrective action.
When conducting audit follow-up of a finding related to cash management routines, which of the following does not need to be considered?A. Inherent risk has been eliminated as a result of resolution of the condition. B. Controls have been implemented to
A. Inherent risk has been eliminated as a result of resolution of the condition.
Internal auditors realize that at times corrective action is not taken even when agreed to by the appropriate parties. Thus, in an assurance engagement, internal auditors should
D. Decide the extent of necessary follow-up work.
Several levels of management are interested in the results of an engagement performed in the marketing department. What is the best method of communicating the results of the engagement?A. Discuss results with all levels of management. B. Discuss results
D. Write a communication to the marketing management and give summary communications to other management levels.
An audit committee is concerned that management is not addressing all internal audit observations and recommendations. What should the audit committee do to address this situation?
B. Require the chief audit executive to establish procedures to monitor progress.
The most important message for the internal auditor to convey to senior management isA. The programming of the sampling techniques will be completed one week early.B. The programmers want to buy new software. C. The project is expected to be completed o
C. The project is expected to be completed on time and within budget.
Which of the following combinations of participants is most appropriate to attend an exit meeting?A. Staff internal auditors who conducted the field work and operating personnel in charge of the daily performance of the activity or function reviewed. B.
C. The responsible internal auditor and representatives from management who are knowledgeable about detailed operations and who can authorize implementation of corrective action.
The preliminary survey discloses that corrective action was never taken on a prior reported assurance engagement observation. Subsequent field work confirms that the condition still exists. Which of the following courses of action should the internal audi
C. Discuss the issue with the person(s) responsible for the problem. (S)he or they should know how to solve the problem.
Follow-up activity may be required to ensure that corrective action has taken place for certain observations made in an assurance engagement. The internal audit activity's responsibility to perform follow-up activities as required is defined in the
B. Internal audit activity's written charter or the agreement with the client.
Some audit findings reveal a variation in the scope of objectives between an audit client's objectives and the overall organizational objectives. Which of the following is the proper action to be taken by the auditor?
A. Identify the variation in scope and present recommendations based on satisfying both the organizational objectives and those of the audit client.
Regarding the unbudgeted funds for the purchase of a software package, the internal auditor shouldA. Leave it out of the engagement communication to avoid criticism.B. Emphasize it because it is outside the budget. C. Leave it out of the engagement comm
D. Disclose it with the expected reduction in programming costs to provide full disclosure.
During an engagement to perform an assurance service related to purchasing, the internal auditors found several violations of organizational policy concerning competitive bidding. The same condition had been reported in an engagement communication last ye
A. The chief audit executive should determine whether management or the board has assumed the risk of not taking corrective action.
Upon reviewing the final communication of engagement results, senior management decided to assume the risk of not implementing corrective action on certain engagement observations. Evaluate the following and select the best alternative for the chief audit
A. Discuss the matter with senior management and possibly the board if the residual risk accepted is excessive.
Assume that the internal auditors' observations are so serious that, in their view, they require immediate action by management. Which of the following statements regarding the internal auditors' responsibility with respect to communicating results and fo
In which of the following scenarios must the chain of command discussions be accelerated?A. Several significant investments held by the corporation are being mismanaged by the corporation. B. A manager is not taking adequate steps to protect a patent dev
C. A publicly traded corporation is hiding its liabilities in off-balance-sheet entities.
What action must the chief audit executive take when (s)he believes that senior management has accepted a level of residual risk that is unacceptable to the organization?A. Report the matter to the board for resolution. B. Discuss the matter with externa
D. Discuss the matter with senior management.
Recommendations in engagement communications may or may not actually be implemented. Which of the following best describes internal auditing's role in follow-up on engagement recommendations? Internal auditing
B. Should follow up to ascertain that appropriate action is taken on engagement recommendations.
The final engagement communication regarding supply activities of a division will most likely be circulated toA. The lowest level of managers with sufficient authority to take action on engagement recommendations because it is their responsibility. B. Th
A. The lowest level of managers with sufficient authority to take action on engagement recommendations because it is their responsibility.
An internal auditing engagement communication disclosed a substantial annual loss to the organization because the purchasing department had no procedures manual. In light of this observation, which of the following actions should the internal audit activi
C. Make recommendations regarding the procedures manual, then perform a follow-up engagement to ensure that corrective action is taken or that senior management or the board takes the responsibility for not taking action.
An internal auditor found that employees in the maintenance department were not signing their time cards. This situation also existed during the last engagement. The internal auditor shouldA. Instruct the employees to sign their time cards. B. Ask the ma
C. Include this observation in the current engagement communication.
Successful consultative communication in an internal auditing engagement is partially based on feedback from engagement clients about internal auditors' actions during the engagement. This feedback
A. Should go to both management and the internal auditors to ensure business value is being added.
Which of the following is a possible disadvantage when the draft engagement communication is provided to local management for review and comment?A. Discussion of the report might center unduly on words rather than on the substantive issues. B. Genuine co
A. Discussion of the report might center unduly on words rather than on the substantive issues.
After an engagement report with adverse observations has been communicated to appropriate engagement client personnel, internal auditing's proper action is toA. Assemble new data to support the observations. B. Examine further the data supporting the obs
C. Schedule a follow-up engagement.
Which of the following actions should not be taken initially when credible evidence exists that the corporation is unnecessarily exposing itself to risk?A. The chief audit executive may discuss his or her concerns with someone outside the organization. B
A. The chief audit executive may discuss his or her concerns with someone outside the organization.
When monitoring the progress of management's disposition of recommendations, the internal auditors should do all of the following, exceptA. Evaluate management responses to observations and recommendations. B. Actively monitor the implementation of recom
D. Create an open-ended time frame for completion of responses to observations and recommendations.
To facilitate effective engagement follow-up, an internal auditor shouldA. Provide a general description of what each recommendation should accomplish.B. Rely on the client's management to evaluate the adequacy of the corrective actions. C. Communicate
D. Determine an acceptable time frame during which management's response must be received.
Which of the following statements best describes an internal auditor's responsibility for follow-up activities related to a previous engagement?
B. The internal auditor should determine that corrective action has been taken and is achieving the desired results or that management or the board has assumed the risk of not taking corrective action.
Which of the following is not an objective of the exit meeting for an engagement performed by the internal auditors?A. To resolve conflicts.B. To identify management's actions and responses to the observations, conclusions, and recommendations. C. To di
D. To identify concerns for future engagements.
An engagement performed at an organization's payroll department has revealed various control weaknesses. These weaknesses, along with recommendations for corrective actions, were addressed in the final engagement communication. This communication should b
The internal audit activity has recently completed an engagement to evaluate the organization's accounts payable function. The chief audit executive decided to issue a summary in conjunction with the final engagement communication. Who is most likely to r
C. Audit committee of the board.
An audit of accounts payable found that the individuals responsible for maintaining the vendor master file could also enter vendor invoices into the accounts payable system. During the exit conference, management agreed to correct this problem. When perfo
A. Modified the accounts payable system to prevent individuals who maintained the vendor master file from entering invoices.
An audit of an organization's claims department determined that a large number of duplicate payments had been issued due to problems in the claims processing system. During the exit conference, the vice president of the claims department informed the audi
C. Monitor the status of corrective action and schedule a follow-up engagement when appropriate.
When actions have not been taken by management on reported engagement observations, conclusions, and recommendations, the internal auditor shouldA. Determine whether management or the board has assumed the risk for not taking corrective action. B. Conclu
A. Determine whether management or the board has assumed the risk for not taking corrective action.
Management is beginning to take corrective action on personnel department deficiencies reported during the last engagement performed by the internal audit activity. The internal auditor should
D. Follow up to see that the corrective action satisfies the engagement recommendations.
Why should organizations require assurance engagement clients to reply promptly and outline the corrective action that has been implemented on reported observations?A. To ensure that the engagement work schedule is kept up to date. B. To indicate concurr
C. To effect savings or to institute compliance as early as possible.
Which of the following parties should the chief audit executive not consult upon the discovery of sensitive information?A. A party outside the organization.B. Legal counsel.C. Senior management within the chain of command. D. The board of directors.
A. A party outside the organization.
Which of the following individuals should normally not receive a final engagement communication related to a review of the purchasing cycle?A. The chair of the board.B. The independent external auditor.C. The director of purchasing. D. The chief audit
A. The chair of the board.
The chief audit executive should ensure follow-up of prior engagement observations and recommendationsA. To determine if corrective action was taken and is achieving the desired results. B. Unless management rejected the recommendation in its initial res
A. To determine if corrective action was taken and is achieving the desired results.
The person responsible for engagement communication distribution should be theA. Chief audit executive or designee.B. Supervisor of the engagement being performed.C. Board. D. Vice president responsible for the activity under review.
A. Chief audit executive or designee.
An internal audit activity had been requested to perform an engagement to determine whether the organization is in compliance with a particular set of laws and regulations. The engagement did not reveal any issues of noncompliance but did reveal that the
Management and the board of directors are responsible for following up on observations and recommendations made by the external auditors. What role, if any, should the internal audit activity have in this process?
A. The internal audit activity should establish a monitoring process to review the adequacy and effectiveness of management's follow-up actions.
The chief audit executive should disseminate results to the appropriate individuals. Disseminating information outside the organizationA. Requires that an engagement performed to generate such information be conducted in accordance with the standards. B.
A. Requires that an engagement performed to generate such information be conducted in accordance with the standards.
An internal auditor has a professional duty to do each of the following with regard to sensitive information exceptA. Disclose sensitive information that the internal auditor has a legal obligation to disclose. B. Seek the advice of legal counsel or othe
B. Seek the advice of legal counsel or other experts.
An organization's internal auditors have conducted a series of assurance engagements. The resulting recommendations have been readily accepted by engagement clients because of the potential cost savings. Given the acceptance of the cost savings engagement
A. Correct No. Scarcity of resources is not a sufficient reason to omit follow-up.
The chief audit executive (CAE) or a designee is required to decide to whom the final engagement communication will be distributed. Observations concerning significant internal control weakness are included in an engagement communication on the accounts p
C. The activities of the board and external auditor may be affected because of the potential for misstated financial statements.
The policy of some organizations is to have engagement clients respond to engagement communications by writing to an administrative vice president who has the primary responsibility for follow-up. Under such arrangements, copies of responses are usually s
D. Inform the administrative vice president that the response is not considered adequate, and coordinate any additional follow-up with the vice president.
Regarding item C, which of the following actions would be inappropriate on the part of the auditor?
A. Report the amounts to the loan committee and leave it up to them to correct. Take no further follow-up action at this time and do not include the items in the engagement communication.
For which situation should the internal auditor consider communicating sensitive information outside the organization's governance structure?
D. The internal auditor believes that the problem will not be properly investigated by management.
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?
A. The internal auditor does not agree with how the board or directors or management may correct the problem. |
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?
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