Free CIA Part 2 Knowledge Quiz by HOCK

Free CIA Part 2 Knowledge Quiz by HOCK

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The internal audit activity's goals should specify

Policies and procedures to guide the internal audit staff.

Engagement work schedules and activities to be reviewed.

Measurement criteria and target dates for completion.

Staffing plans and financial budgets.

Policies and procedures relative to managing the internal audit activity should

Give consideration to its structure and the complexity of the work performed.

Prescribe the format and distribution of engagement communications and the classification of engagement observations.

Ensure compliance with its performance standards.

Result in consistent job performance.

Which of the following statements most accurately reflects the chief audit executive's responsibilities for human resources management and development?

The CAE is responsible for performing an annual review of each internal auditor's performance but has no explicit responsibility for counseling internal auditors on their performance and professional development.

The CAE is responsible for developing formal job descriptions for the staff but has no explicit responsibility for administering the organization's compensation program.

The CAE is responsible for selecting qualified individuals but has no explicit responsibility for providing ongoing educational opportunities for the internal auditor.

The CAE is responsible for selecting qualified individuals but has no explicit responsibility for the preparation of job descriptions.

Which of the following activities is outside the scope of internal auditing?

Assessing an operating department's effectiveness in achieving stated organizational goals.

Safeguarding of assets.

Evaluating controls over compliance with laws and regulations.

Ascertaining the extent to which objectives and goals have been established.

The major reason for the internal auditor's involvement in information system development is for the internal auditor to

Gain familiarity with systems for use in subsequent reviews.

Help assure that systems have adequate control procedures.

Help minimize the cost and development time for new systems.

Propose enhancements for subsequent development and implementation.

The acceptable level of detection risk is inversely related to the

Assurance provided by substantive tests.

Risk of misapplying auditing procedures.

Preliminary judgment about materiality levels.

Risk of failing to discover material misstatements.

The scope statement of an internal audit report should

Identify the audited activities and describe the nature and extent of auditing performed.

Define the standards, measures, or expectations used in evaluating audit findings.

Communicate the internal auditor's evaluation of the effect of the findings on the activities reviewed.

State the factual evidence that the auditor found in the course of the examination.

The most reliable forms of documentary evidence are those documents that are

Prenumbered.

Internally generated.

Easily duplicated.

Authorized by a responsible official.

One of the primary roles of an engagement work program is to

Serve as a tool for planning and conducting engagement work.

Document an internal auditor's evaluations of controls.

Provide for a standardized approach to the engagement.

Assess the risks associated with the activity under review.

Which of the following is deductive reasoning?

Reasoning from one or more particular facts to reach a general conclusion.

Reasoning on a post hoc basis.

Reasoning from the general to the particular.

Reasoning through the development of a carefully constructed hypothesis.

A financial institution is overstating revenue by charging too much of each loan payment to interest income and too little to repayment of principal. Which of the following audit procedures would be least effective in detecting this error?

Perform an analytical review by comparing interest income this period as a percentage of the loan portfolio with the interest income percentage for the prior period.

Use an integrated test facility (ITF) and submit interest payments for various loans in the ITF portfolio to determine if they are recorded correctly.

Use test data and submit interest payments for various loans in the test portfolio to determine if they are recorded correctly.

Use generalized audit software to take a random sample of loan payments made during the period, calculate the correct posting amounts, and trace the postings that were made to the various accounts.

Documentation required to plan an internal auditing engagement should include information that

Resources needed to complete the engagement were considered.

Planned engagement work will be completed on a timely basis.

Intended engagement observations have been clearly identified.

Internal audit activity resources are efficiently and effectively employed.

The preliminary survey indicates that severe staff reductions at the engagement location have resulted in extensive amounts of overtime among accounting staff. Department members are visibly stressed and very vocal about the effects of the cutbacks. Accounting payrolls are nearly equal to prior years, and many key controls, such as segregation of duties, are no longer in place. The accounting supervisor now performs all operations within the cash receipts and posting process and has no time to review and approve transactions generated by the remaining members of the department. Journal entries for the last 6 months since the staff reductions show increasing numbers of prior-month adjustments and corrections, including revenues, cost of sales, and accruals that had been misstated or forgotten during month-end closing activity. The internal auditor should

Discuss these observations with management of the internal audit activity (IAA) to determine whether further work would be an efficient use of internal auditing resources at this time.

Proceed with the scheduled engagement but add personnel based on the expected number of observations and anticipated lack of assistance from local accounting management.

Research temporary help agencies and evaluate the cost and benefit of outsourcing needed services.

Suspend further engagement work since the observations are obvious and communicate the final results.

The preliminary survey should accomplish a number of things, and it allows the internal auditor to

Establish the engagement objectives.

Provide a means of controlling and evaluating the progress of the engagement.

Provide a means of evaluating the internal auditor's competence.

Become familiar with the client's overall activities.

A 90% confidence interval for the mean of a population based on the information in a sample always implies that there is a 90% chance that the

Estimate is equal to the true population mean.

True population mean is no larger than the largest endpoint of the interval.

Standard deviation will not be any greater than 10% of the population mean.

True population mean lies within the specified confidence interval.

In sampling applications, the standard deviation represents a measure of the

Expected error rate.

Level of confidence desired.

Degree of data variability.

Extent of precision achieved.

Governmental auditors have been increasingly called upon to perform audits to determine whether or not individuals are getting extra social welfare payments. One common type of welfare fraud is individuals receiving more than one social welfare payment. This is often accomplished by filing multiple claims under multiple names, but using the same address. Which of the following computer audit tools and techniques would be most helpful in identifying the existence of this type of fraud?

Tagging and tracing.

Generalized audit software.

Integrated test facility.

Spreadsheet analysis.

Reliable evidence is best defined as evidence which

Is reasonably free from error and bias and faithfully represents that which it purports to represent.

Is obtained by observing people, property, and events.

Is supplementary to other evidence already gathered and which tends to strengthen or confirm it.

Proves an intermediate fact, or group of facts, from which still other facts can be inferred.

The correlation coefficient that indicates the weakest linear association between two variables is

-0.73

-0.11

0.12

0.35

All of the following are examples of benchmarking standards except

The performance of the unit during the previous year.

The best performance of the unit in comparable past periods.

A comparison with a similar unit within the same company that has been successful in implementing the process or processes being studied.

The best performance of a competitor with a similar operation.

The primary purpose of an internal auditor's working papers is to

Provide documentation of the planning and execution of engagement procedures performed.

Serve as a means with which to prepare the financial statements.

Document weaknesses in internal control with recommendations to management for improvement.

Comply with the Standards.

Which of the following best describes an internal auditor's initial responsibility regarding errors uncovered during a financial statement audit?

Report the material errors.

Assess the risk of misrepresentation.

Discuss the situation with the engagement client.

Inform the audit committee.

Which of the following is the best approach for obtaining feedback from engagement clients on the quality of internal audit work?

Ask questions during the exit interviews and send copies of the documented responses to the clients.

Call engagement clients after the exit interviews and send copies of the documented responses to the clients.

Distribute questionnaires to selected engagement clients shortly before preparing the internal audit annual activity report.

Provide questionnaires to engagement clients at the beginning of each engagement and request that the clients complete and return them after the engagements.

One engagement procedure for an engagement to evaluate facilities and equipment is to test the accuracy of recorded depreciation. Which of the following is the best source of information that the equipment in question is in service?

A review of depreciation policies and procedures.

A comparison of depreciation schedules with a listing of insurance appraisals for the same equipment.

A comparison of depreciation schedules with the maintenance and repair logs for the same equipment.

A review of inventory documentation for the equipment.

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 include

Statements of opinion about the cause of an observation.

Pertinent factual statements concerning the control weaknesses uncovered during the course of the engagement.

Statements of both fact and opinion developed during the course of the engagement.

Statements concerning potential future events that may be helpful to the engagement client.

Which of the following techniques is best for emphasizing a point in a written communication?

Place the point in the middle rather than at the beginning or end of the paragraph.

Use a passive rather than active voice.

Highlight the point through the use of non-parallel structure.

Use a short sentence with one idea rather than a longer sentence with several ideas.

Recommendations should be included in audit reports to

Provide management with options for addressing audit findings.

Ensure that problems are resolved in the manner suggested by the auditor.

Minimize the amount of time required to correct audit findings.

Guarantee that audit findings are addressed, regardless of the cost.

Which of the following would not be included in the statement of scope in an engagement final communication?

Period covered by the review.

Engagement objectives.

Related activities excluded from the review.

Nature and extent of the engagement work performed.

A recommendation in a final engagement communication should address what attribute?

Cause

Condition

Criteria

Effect

During the course of an engagement, an internal auditor makes a preliminary determination that a major division has been inappropriately capitalizing research and development expense. The engagement is not yet completed, and the internal auditor has not documented the problem or determined that it really is a problem.

However, the internal auditor is informed that the chief audit executive has received the following communication from the president of the organization:

"The controller of Division B informs me that you have discovered a questionable account classification dealing with research and development expense. We are aware of the issue. You are directed to discontinue any further investigation of this matter until informed by me to proceed. Under the confidentiality standard of your profession, I also direct you not to communicate with the outside auditors regarding this issue."

Which of the following is an appropriate action for the CAE to take regarding the questionable item?

Immediately report the communication to The Institute of Internal Auditors and ask for an ethical interpretation and guidance.

Inform the president that this scope limitation will need to be reported to the board.

Continue to investigate the area until all the facts are determined and document all the relevant facts in the engagement records.

Immediately notify the external auditors of the problem to avoid aiding and abetting a potential crime by the organization.

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