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1. The definition of internal audit includes all of the following except A. Independent and objective. B. Assurance and consulting activity. C. Determine efficient and effective performance. D. Add value and improve an organization's operations. 2. Of the following: I. More expertise II. Improved control over audit costs III. Improved alignment with company goals The reasons for outsourcing an internal audit include A. I Only. B. I & II. C. II & III. D. I, II, & III. Original 3. The primary difference between operational auditing and financial auditing is that in operational auditing A.The auditor is only concerned with the audited activity's adherence to company policy and procedures. B. The auditor is seeking to help management use resources in the most effective manner possible. C. The auditor starts with the financial statements of an activity being audited and works backward to the basic processes involved in producing them. D. The auditor can use analytical skills and tools that are not necessary in financial auditing. Original 4. Independence permits internal auditors to render impartial and unbiased judgments. The best way for internal audit departments to achieve independence is through A. Individual knowledge and skills. B. Organizational knowledge and skills. C. Supervision within the organization. D. Organizational status and individual objectivity. Original 5. The proper organizational role of internal auditing is to A. Assist external auditors in order to reduce external audit fees B. Perform studies to assist in the attainment of more efficient operations C. Serve as an investigative arm of senior management and the board of directors D.Serve as an independent, objective assurance and consulting activity that adds value to the organization 6. During an audit of the quality control area, an auditor has identified that a specific product has a 3% failure rate when tested. The specification calls for a failure rate of less than 1.8%. Product failure might lead to customer injury and in turn lawsuits against the company. The auditor has communicated this to management. Which of the following is NOT an acceptable response from management with regard to this risk? A. Management is aware of the risk and has decided the risk is acceptable. B. Management has decided not to continue the manufacture of this product. C.Management has decided to increase the quality control activity to reduce the manufacture of unacceptable product to an acceptably low level. D.Management has decided that the test data is unreliable and has decided not to respond to the audit findings. Original 7. Audit charters are important for internal audit departments. Which of the following items is generally NOT a reason to have an audit charter? A.Audit charters provide a commitment from management to support the internal audit department's activities
and recommendation. The organization's objectives and goals will be achieved efficiently and economically. Attribute Standards B. protecting. Audit charters define the reporting requirements for internal audit departments Original 8. and requirement. and using its resources effectively. when appropriate. C. are accurate and timely 11. B. B. These key elements are A. criteria. and recommendation. cause. Senior management has ordered a compliance audit of the organization employee benefits package. Performance Standards C. D. D. and recommendation. Your approach will most likely be to hire A. D. Audit charters define the skills and competencies required by the internal audit department C. Performing a follow-up on audit findings 13. Which of the following is considered a primary engagement objective by both the chief audit executive and senior management? A. Inexperienced personnel and train them the way the organization wants them trained. criteria. Due care B. Internal control evaluation C. Benefits payments. Condition. an internal auditor must convince management to take action concerning its findings. Condition. Your organization has selected you to develop an internal audit activity. effect. The purpose of internal audit's evaluation of the effectiveness of existing risk management processes is to determine that A. The level of the organizational contributions is adequate to meet the program's demands B. D. Reporting to the audit committee D. Location. Program audits include determining A. effect. effect. or functions. cause. cause. The Standards for the Professional Practice of Internal Audit are classified in three major categories. Degreed accountants because most internal audit work is accounting related. B.The organization's objectives and goals will be achieved in an accurate and timely manner and with minimal use of resources. 15.B. Which of the following is NOT one of these categories? A. effect.Individual programs are operating in accordance with contractual requirements and government regulations C. criteria. activities. Internal auditors each of whom possess all the skills required to handle all engagements. When preparing an audit report. The IIA Standards for the Professional Practice of Internal Auditing do not include the broad category . 9. Condition. C.Internal auditors who collectively have the knowledge and skills needed to perform the responsibilities of the internal audit activities. cause. C. Whether the entity is acquiring. When reporting on an audit finding an auditor must include some key elements about that finding in the report. Participation levels support continuation of individual programs D. Audit charters define the department's authority and responsibility D. 10. programs. 14. Implementation Standards Original 12.Management directs processes so as to provide reasonable assurance of achieving objectives and goals. C. Governance Standards D. Which of the following is a requirement of the Standards for the Professional Practice of Internal Audit that is not a requirement of an external auditor performing a financial statement audit? A. The effectiveness of organization. The causes of inefficiencies or uneconomical practices. source. Whether the entity has complied with laws and regulations concerning matters of efficiency.Management has planned and designed so as to provide reasonable assurance of achieving objectives and goals. B.
. All instances of illegal acts that could result in criminal prosecution. Proficiency and Due care. Have a fulltime position as an internal auditor. 24. B. When dealing with standards. input measurements are most important for audits of A. D. D. Accounting errors. C.of A. B. Lines of communication within the entity of the internal auditors. Program results. B. Performing the Engagement. B. Economy. Operational efficiency. 20. B. Internal auditing standards. Meet an experience requirement. Which of the following statements is true? A . Organizational status of the internal auditors. GAAS only. Nature of Work. D. procedures. 23. GAGAS only. 22. Pass a two-day examination. and comparisons. The federal law that established uniform requirements for audits of federal assistance provided to state and local governments is called A. The size of the internal audit department. 21. B. C. D. Which of the following is not required to become a Certified Internal Auditor (CIA)? A. D. C. C. Review of the means of safeguarding assets. Quality Control. Plan of organization. external auditors should obtain evidence about A. Review of economy and efficiency in the use of resources. When considering the competence of internal auditors. they must follow A. Sarbanes-Oxley Act or 2002 D. B. 16. 18. plans. C. GAAS and GAGAS. measurements. and regulations. The GAO standards do not specifically require a written report in financial statement audits for A. Which of the following internal audits is generally NOT a type of government audit? A. C. B. D. Educational and experience qualifications of the internal auditors. D. C. Internal control structure and the control risk assessment. Hold a college degree. Uniform Requirements Act of 1992 C. Recommendations for actions to improve operations. Adherence to managerial policies. 17. laws. Compliance with applicable laws and regulations. Review of compliance with policies. Review of the results of programs. D. The Single Audit Act of 1984 B. C. Financial statements. Efficiency. When independent CPAs in public practice take engagements to audit government units or financial assistance recipients. The definition of administrative control does not include reference to A. Audit Reduction Act of 1985 19. External auditors must consider the internal audit function as part of obtaining an understanding of a company's internal control structure.
Original 25. C. D. Which of the following is a difference between performing an audit and performing a fraud examination? A.S. B. Auditors use analytical procedures. D. such as trend analysis to identify risks of misstatements. U. Provide an opinion on overall compliance with laws and regulations. Congress B. C. The demand for compliance auditing in GAGAS terms is generated by: A. 29. State that compliance with laws and regulations is the responsibility of the entity's management. D . D. while fraud examiners are not interested in analytical procedures since they must identify specific items that prove the occurrence of fraud. 31. This report should A. In performing a financial statement audit in accordance with Government Auditing Standards. After performing work in a compliance attestation engagement and finding that a governmental . Financial statement audits performed in accordance with generally accepted auditing standards. Executive Office of Management and Budget C. Which of the following statements is a standard applicable to financial statement audits in accordance with Government Auditing Standards? A. Which of the following is NOT one of those objectives? A. External auditors must investigate the competence and objectivity of internal auditors. Fraud examiners have four main objectives in performing an investigation. Determine how the fraud occurred. C. while fraud examiners are only concerned with the theft of assets by employees. Acts discreditable to the profession. Auditors are not concerned with the nature of a financial misstatement. B. C . Indicate that the auditor does not possess legal skills and cannot make legal judgments. B. while fraud examiners generally do not believe that any fraud is immaterial.B. C. Determine if a fraud exists. Governmental managers' obligations to follow laws and regulations. D. The U. Auditors are only concerned with financial statement errors. An auditor should briefly describe in the auditor's report the method of statistical sampling used in performing tests of controls and substantive tests. 28. Federal Accounting Standards Board 30.S.An auditor should determine the extent to which the entity's programs achieve the desired level of results. 27. Determine the effect on financial statement users. Determine who was involved in the fraud. C. Auditors are generally not concerned with small immaterial misstatements. 26. An auditor should report on the scope of the auditor's testing of internal controls. Describe the laws and regulations that the entity must comply with. D. an auditor is required to report on the entity's compliance with laws and regulations. External auditors must review all work performed by internal auditors. Supreme Court D. Public reports on government managers' following laws and regulations. B. while fraud examiners are concerned with the nature of the misstatement.External auditors must share responsibility for the work of internal auditors if it is used for evidence for the financial statement audit. Government Accountability Office is an agency of: A. B. U.An auditor should assess whether the entity has reportable measures of economy and efficiency that are valid and reliable.S.
A GAO audit report entitled Aviation Safety: Safer Skies Initiative Has Taken Initial Steps to Reduce Accident Rates by 2007 is most likely a report based on work the auditors performed in a: A. IV. and nonprofit organizations that: A. 37. Receive $300. Internal control design and strength of operation. an independent auditor should A. C. I & II B. the fraud examiner takes great care to preserve and identify any documents that may indicate fraud. B.agency's managers failed to install and perform even the most elementary controls to ensure compliance with laws and regulations and in fact committed numerous violations. Spend $300. Test a sample of the transactions and balances that the internal auditors examined. Write a disclaimer of opinion related to knowledge of noncompliance. When performing a fraud examination.000 or more federal funds. III. This is called A. C. D. D.000 or more federal funds. Management's noteworthy good accomplishments. Examine documentary evidence of the work performed by the internal auditors.000 or more federal funds. 35. Spend $500. GAGAS performance audit reporting standards requires the reports to tell about which of the following: I. Disclaimer of opinion on financial statements. D. 32. Performance audit of air control regulation effectiveness. In assessing the objectivity of internal auditors. AICPA 38. B. II & IV 36.Report (opinion) on financial statements. Compliance audit of air safety regulations. Performance audit of program goal achievement. and report on compliance audit regarding laws and regulations. II. agencies. I and II only. Abuse of public money and property. C. II and III only. C.Report on compliance audit of audit regarding laws and regulations and report(s) on program goal(s) achievement. 33. II & III D. A. Evaluate the quality control program in effect for the internal auditors. the basic report(s) include: A. The work of internal auditors may affect the independent auditor's I. B. Preserving the chain of custody of the evidence . Write an adverse report on actual compliance. Presentation of financial statements in accordance with GAAP.Write a report modified to disclose particular noncompliance events (specific violations of laws and regulations). Procedures performed in obtaining an understanding of the internal control structure. D. I and III only. and III. D. When auditors report on a financial audit engagement in accordance with GAGAS. report on internal control. Determine the organizational level to which the internal auditors report. 34. Write an unqualified report on actual compliance. III. C. II. Report on internal control and report(s) on efficiency and effectiveness of operations. The Single Audit Act of 1984 requires an annual audit of all governments. I & IV C. and report on compliance audit regarding laws and regulations. Procedures performed in assessing the risk of material misstatement. B. A.000 or more federal funds. C. B. B. D. report on internal control. Receive $500. I. Substantive tests performed in gathering direct evidence. Financial statement audit. II. an auditor most likely would: A.
Establishing evidential procedure C. In all audits of governmental units performed according to GAGAS. B. B. D. That the auditors report to the audit committee and the composition of the audit committee. Compliance auditing. Evaluate the feasibility of attaining the company's operational objectives. C.The controller can control the scope of audits and censor audit reports before being sent to management and the audit committee. B. The purchasing process is causing unnecessary delays in ordering product. A typical objective of an operational audit is for the auditor to A. Performance auditing. The controller may have no training as an internal auditor. The conclusions about the audit finding. Forensic auditing 39. The audit committee of directors of the agency under audit. D. Which of the following would be considered the greatest problem for internal audit if the chief audit executive reported to the controller? A. D. D. 40.B. Exit interviews with managers in the governmental unit. Which of the following is considered different and more limited in objectives than the others? A. Obtaining a sufficient understanding of internal control. Managers of the government agency under audit and in which the auditors are employed. In an internal auditor's report audit findings would include all of the following except A.The organizational status of the audit committee and the individual independence of internal auditors in the department. C. C. C. The congressional committee that ordered the audit. internal audit would likely be the first to lose funding. Operational auditing. Political action committees of which they are members. Financial statement auditing. 41. Documentation of the audit. 45. The controller would amend the audit schedule so more audit time was spent on accounting issues. The nature of the audit charter and the objectivity of the audit staff. B. Governmental auditors' independence and objectivity are enhanced when they report the results of an audit assignment directly to A. B. Determine whether the financial statements fairly present the company's operations. Make recommendations for achieving company objectives. B. The organizational level of the chief audit officer and the objectivity of the audit staff. C. D. B. Marking an evidential exhibit D. . Management auditing. 43. The purchasing department is not following a new human resource policy requiring a six month performance review for new employees. A review of the bidding process indicates that copies may be operating under two different names and therefore purchasing is not getting the three independent bids required by policy. 44. C. 42. 46. The director of purchasing is new to the organization and has made several decisions regarding vendor approvals with which the auditor does not agree. The cause of the audit finding. Which of the following would be considered in determining if an internal audit department is independent? A. D. C. D. the most important work is A. Which of the following is not an internal audit objective designed to add value to a purchasing department? A. During times when the budget needs to be cut. The recommendation to correct the audit finding. C. The effect of the audit finding on the budget of the internal audit department. B.
A definition of the scope of the audit department's activities. 51. 47. D. The federal Single Audit Act of 1984 requires auditors to determine and report several things about state and local governments that receive federal funds. B. A report on the agency's internal controls. A report on the agency's compliance with applicable laws and regulations. C. D. B. Which of the following is usually not part of an internal audit department's audit charter? A.Correspondence of the agency's performance with public opinion regarding the social worth of its mission.A statement that the audit was conducted in accordance with generally accepted government audit standards.The comprehensive internal audit plan is more detailed although it covers fewer areas than would normally be covered by an external auditor. The organizational structure of the internal audit department. Was appointed by the state governor with responsibility to report to the legislature. 49. A commitment from management to ensure the independence of the internal audit department. Performance audits. . D. Normally works as a state auditor employed in the department of human services. C.An opinion on the fair presentation of the financial statements in accordance with generally accepted accounting principles. C. D. D. C. Constitutionality of laws and regulations governing the agency.Was the state audit official elected in a general statewide election with responsibility to report to the legislature. Commentary by the agency's managers on the audit findings and recommendations. Which of the following would you not expect to see in an auditor's report(s) on the financial statements of an independent government agency? A. 48. C. Attestation engagements. Compliance audits. B. A report on the government's compliance with applicable laws and regulations.D. D. Evaluation of the personal managerial skills shown by the agency's leaders. The comprehensive internal audit plan is substantially identical to the audit plan used by an external auditor because both review substantially identical areas. Also held a position as a project manager in the highway department.Evaluations concerning the agency's achievements of the goals set by the legislature for the agency's activities. The reporting requirements of the internal audit department. B. Governmental auditing can extend beyond audits of financial statements to include audits of an agency's efficient and economical use of resources and A. A report on the government's internal control related to federal funds. B. The government's performance in meeting goals set in enabling legislation. A governmental auditor assigned to audit the financial statements of the state highway department would not be considered independent if the auditor A. C.The comprehensive internal audit plan is less detailed and covers fewer areas than would normally be reviewed by an external auditor. The Government Accountability Office (GAO) describes expanded-scope governmental auditing to include all of the following except A. D. Financial statement audits. Which of the following best describes how the detailed audit plan of the external auditor who is engaged to audit the financial statements of a large publicly held company compares with the audit client's comprehensive internal audit plan? A.The comprehensive internal audit plan covers areas that would normally not be reviewed by an external auditor. 50. Which of the following is not normally required to be reported? A. Report on the company's relative success in attaining profit maximization. B. C. 53. B. 52.
The petty cash box is always locked in the desk of the custodian. A reason to believe that a fraud has occurred is called A. 57. . Install airtight control systems of checks and supervision. Compliance auditing in audits performed under the Single Audit Act of 1984 in accordance with GAGAS is necessary for an auditor's A. In a fraud audit original documents must be protected from damage and tampering to A. D. Determine quantitative standards that describe goals the agency was supposed to achieve. E. Compare the agency's actual output results to quantitative goal standards.Selecting and performing procedures designed to obtain evidence about operational problems and production output. D. B. The board of directors reviews and approves all investment transactions. 59. C. D. Which two of the following characterize the work of fraud examiners? A. B. B.Practice management "of the people and for the people" to help them share personal and professional problems. A & D 58. C. An environmental audit might include all of following except A." auditors should especially notice and review employee activities under which of these conditions? A.Determination of a materiality amount that represents a significant misstatement of the financial statements. Which of the following is the least important consideration for a governmental auditor who needs to be objective when auditing and reporting on an agency's achievement of program goals? A. D. In government and internal performance auditing. including reportable conditions and material weaknesses. C. Analysis of control weaknesses for determination of acceptable fraud risk. Forensics C. efficiency. Report on the auditee's internal control. Analysis of control strengths as a basis for planning other audit procedures. of applicable laws and regulations. Develop documentation for employee dismissal C. The best way to enact a broad fraud-prevention program is to A. C. or lack thereof. Measure the actual output results of agency activities. B.Determining the applicable generally accepted government accounting principles pronounced by the GASB. C. 60. Establish motive B. Predication D.Place dedicated "hotline" telephones on walls around the workplace with direct communication to the company ethics officer. The company always estimates the inventory but never takes a complete physical count. When auditing with "fraud awareness. C. Protect the chain of custody D. Determining that proper tracking of waste material is being maintained by the organization. B. 56. 55. Defining problem areas or opportunities for improvement and defining program goals. Evaluating evidence in terms of economy. and achievement of program goals. Name an "ethics officer" who is responsible for receiving and acting upon fraud tips. D. Opinion on the auditee's observance.Management has published a company code of ethics and sends frequent communication newsletters about it. Report of a supplementary schedule of federal assistance programs and amounts. D. B. becoming large over a number of years. Opinion on the auditee's financial statements. which of the following is the least important consideration when performing the field work? A. Perform a comprehensive review of management controls. Ensure suspects are unaware of an investigation in progress 62.54. Deliberation B.Thinking of a materiality amount in cumulative terms²that is. Restitution 61.
External auditors B. Auditors of governmental units would not be presumed to be independent if they are A. Managing the internal audit activity. Independent under AICPA Code of Professional Conduct rules. Review of control systems that ensure compliance with company policies. and regulations. Engagement planning. Audits of financial statements for security registration statements. and program results. programs. Whether the department's goals are aligned with the organization's goals. The extent to which the desired results or benefits established by the legislature are being achieved. All of the above . 68.Review of effectiveness in achieving program results in comparison to pre-established objectives and goals. which of the following does the auditor not need to determine and report for each organization? A. D. A report on the auditee's compliance with applicable laws and regulations. or functions. procedures. C. Question also found in Study Guide 63. C. A report on the auditee's internal control structure and the control risk assessment. D.Whether the financial statements of an audited entity fairly present the financial position in accordance with GAAP. All of the above are appropriate issues for an environmental audit. 67. In a single audit of federal financial assistance programs. B. The effectiveness of organizations. Which of the following auditors is responsible for designing and planning an audit to detect material illegal acts and frauds? A. Reviewing the liability account established for pending environmental claims against the company. A report of any significant accomplishments and management improvements. D. An expanded scope audit of economy. Compliance with policies. and using resources economically and efficiently. B. C. 69. D. The services provided by internal auditors do not include A. C. laws. Whether the agency has complied with laws and regulations applicable to the program. efficiency. laws and regulations. Governmental auditors D. That the financial statements are presented fairly in accordance with GAAP. 64. C. Program audits do not include determining A. C. Whether the entity is acquiring. The causes of inefficiencies or uneconomical practices. The IIA Performance Standards would not include the standard for A. practicing. Auditing the branch of government to which they are assigned. That the laws and regulations have been complied with. Free from sources of personal impairment. C. 66. Operational audits do not include determining A. 65. D. 70. B. B.B. Internal auditors C. Nature of work. B. D.Reviewing the environmental history of another company that the internal auditor's organization is interested in purchasing. plans. activities. B. Audit report on financial statements. D. B. Appraisals of the economy and efficiency of operations. D. Elected or appointed and reporting to a legislative body of government. The GAO Government Auditing Standards requirements for written reports in financial statement audits do not include A. C. Review of control systems to ensure compliance with company policies. That an adequate internal control system is in place.
fraud examiners are called when a fraud is already known or suspected. Predication D.71. Admissibility of testimony . Expert identification B. Generally. Preserving the evidence is called A. Chain of custody C. Admonition 72. Evidence conservation D. The term that means a reason to believe a fraud has occurred is A. Prediction B. Fraud examiners must be concerned with the integrity of the evidence that they find. Suspicion C.