Feedback - MOCKP1D2

RASHMI MAN.
1DE
INTERNATIONAL PROFESSIONAL FINANCIAL CAREERS ACADEMY PVT LTD
MOCK TEST RESULT ANALYSYS

PART 1 CMA: INT CNTL, INT AUDIT, SYS CTRL & ETHICS -II
--------------------------------
Student name: RASHMI MAN
Level A : Easy
LEvel B : Moderate
LEvel C : Tough
**********************************************************************
Questions # 1
A proper consideration of the client's internal control structure is
an integral part of the independent external audit. The results
A. Must be reported to the shareholders.
B. Bear no relationship to the extent of substantive testing to be
performed.
C. Are not reported to client management.
D. May be used as the basis for determining the acceptable level of
detection risk.
You have answered : A

This is a Level B question
WRONG! The correct choice is D . The second standard of field work requires that
the independent
auditor obtain a sufficient understanding of
the internal control
structure to plan the audit and determine the
nature, timing, and
extent of tests. After obtaining his
understanding and assessing both
control risk and inherent risk for specific
financial statement
assertions, the auditor determines the
acceptable level of detection
risk in light of the level to which (s)he
wishes to restict the risk
of a material misstatement in the financial
statements.
No of correct respondees to this question : 28 out of 45

**********************************************************************
Questions # 2
Which one of the following is most likely to be considered a
reportable condition?
A. The petty cash custodian has the ability to steal petty cash.
Documentation for all disbursements from the fund must be submitted
with the request for replenishment of the fund.
B. An inventory control clerk at a manufacturing plant has the ability
to steal one completed television set from inventory a year. The
theft probably will never be detected.
C. An account receivable clerk, who approves sales returns and
allowances, receives customer remittances and deposits them in the
Page 1
RASHMI MAN.1DE
bank. Limited supervision is maintained over the employee.
D. A clerk in the invoice processing department fails to match a
vendor's invoice with its related receiving report. Checks are not
signed unless all appropriate documents are attached to a voucher.
You have answered : C
CORRECT Separation of duties among key functions is an important control
procedure. An accounts receivable clerk who is permitted to approve
sales returns and allowances and also receive customer remittances
could misappropriate funds received and cover the shortage by debiting
sales returns and allowances. Limited supervision is insufficient to
compensate for lack of segregation of duties.
**********************************************************************
Questions # 3
Which one of the following situations represents an internal control
weakness in accounts receivable?
A. Internal auditors confirm customer accounts periodically.

B. Delinquent accounts are reviewed only by the sales manager.
C. The cashier is denied access to customers' records and monthly
statements.
D. Customers' statements are mailed monthly by the accounts
receivable department.
You have answered : B

This is a Level A question
CORRECT Internal control over accounts receivable begins with a proper
separation of duties. Hence, the cashier, who performes an asset
custody function, should not be involved in record keeping. Accounts
should be periodically confirmed by an auditor and delinquent accounts
should be reviewed by the head of accounts receivable and the credit
manager. Customer statements should be mailed monthly by the
accounts receivable department without allowing access to the
statements by employees of the cashier's department. The sales
manager should not be the only person to review delinquent accounts
because (s)he may have an interest in not declaring an account
uncollectible.

**********************************************************************
Questions # 4
Audit risk consists of inherent risk, control risk, and detection
risk. Which of the following statements is true?
A. Cash is more susceptible to theft than an inventory of coal because
it has a greater inherent risk.
B. The risk that material misstatement will not be prevented or
detected on a timely basis by internal control can be reduced to zero
by effective controls.
C. Detection risk is a function of the efficiency of an auditing
procedure.
D. The existing levels of inherent risk, control risk, and detection
risk can be changed at the discretion of the auditor.

Page 2
RASHMI MAN.1DE
CORRECT Inherent risk is the susceptibility of an assertion to material
misstatement in the absence of related controls. Some assertions and
related balances balances or classes of transactions have greater
inherent risk. Thus, cash has a greater inherent risk than less
liquid assets.
**********************************************************************
Questions # 5
The requirement of the Foreign Corrupt Practices Act of 1977 to devise
and maintain adequate internal control is assigned in the act to the
A. Chief financial officer.
B. Board of directors.
C. Director of internal auditing.
D. Company as a whole with no designation of specific persons or
positions.
You have answered : D

CORRECT The accounding requirements apply to all public companies that must
register under the Securities Exchange Act of 1934. The
responsibility is thus placed on companies, not individuals.
**********************************************************************
Questions # 6
Factors that should be considered when evaluating audit risk in a
functional area include:
1. Volume of transactions.
2. Degree of system integration.
3. Years since last audit.
4. Significant managment turnover.
5. (Dollar) value of assets at risk.
6. Average value per transaction.
7. Results of last audit.
Factors that best define the materiality of audit risk are:

A. 1 through 7.
B. 2,4, and 7.
C. 1,5, and 6.
D. 3,4, and 6.

This is a Level C question
WRONG! The correct choice is C . Audit risk is the risk that the audit will not
detect material
misstatments. Materiality is a function of
quantitative and
qualitative factors, of which the former are
obviously more readily
defined. Factors 1, 5, and 6 can all be
quantified.
**********************************************************************
Page 3
RASHMI MAN.1DE
Questions # 7
Controls that are designed to provide management with assurance of the
realization of specified minimum gross margins on sales are
A. Directive controls.
B. Preventive controls.
C. Detective controls.
D. Output controls.

WRONG! The correct choice is A . The objective of directive controls is to cause
or encourage desirable
events to occur, e.g., providing management
with the assurance of the
realization of specified minimum gross margins
on sales.
**********************************************************************
Questions # 8
The procedure requiring preparation of a prelisting of incoming cash
receipts, with copies of the prelist going to the cashier and to
accounting, is an example of which type of control?
A. Preventive.
B. Corrective.
C. Detective.
D. Directive.
CORRECT A prelisting of cash receipts in the form of checks is a preventive

control. It is intended to deter undesirable events from occuring.
Because fraud involving cash is most likely to occur before receipts
are recorded, either remittance advices or a prelisting checks should
be prepared in the mail room so as to establish recorded
accountability for cash as soon as possible. A cash register tape is
a form of prelisting for cash received over the counter. One copy of
a prelisting will go to accounting for posting to the cash receipts
journal, and another is sent to the cashier for reconciliation with
checks and currency received.
**********************************************************************
Questions # 9
Shipments are made from the warehouse based on customer purchase
orders. The matched shipping documents and purchase orders are then
forwarded to the billing department for sales invoice preparation.
The shipping documents are neither accounted for nor prenumbered.
Which of the following substantive tests should be extended as a
result of this control weakness?
A. Select bills of lading from the warehouse and trace the shipments
to the related sales invoices.
B. Foot the sales register and trace the total to the general ledger.
C. Trace quantities and prices on the sales invoices to the customer
purchase order and test extensions and footings.
D. Trace a sample of purchase orders to the related sales invoices.
Page 4
RASHMI MAN.1DE
WRONG! The correct choice is A . When shipping documents are neither accounted
for nor nor
prenumbered, unrecorded sales are likely to
result. Selecting bills
of lading and tracing them to sales invoices
will test that goods
shipped were billed.
**********************************************************************
Questions # 10
Important types of control systems and procedures for accounting
information systems are feedback, feedforward, and preventive. Which
of the following is in the correct order of feedback, feedforward, and
preventive control system?
A. Cost accounting variances, separation of duties, and cash planning.
B. Cost accounting variances, cash budgeting, and organizational
independence.
C. Cash budgeting, cost accounting variances, and separation of
duties.
D. Inventory control, capital budgeting, and cash budgeting.
You have answered :

U Hv not Answered this. The correct choice is B . Calculation of cost accounting

variances is an example of a feedback
control; that is, a control
that provides after-the-fact information
about the results of an
operationh. A feedforward (planning) control
predicts future conditions.
Feedforward is involved in such
activities as cash budgeting and
cash planning. A preventive control
forestalls the occurence of
variations from desirable performance.
Separation of duties,
organizational independence, and inventory
control are examples. Thus, the
following is in proper order: Cost
accounting variances, cash
budgeting, and organizational independence
or separation of duties.
**********************************************************************
Questions # 11
To be more responsive to its customers, a bank wants a system that
will permit account representatives to consolidate information about
all the accounts belonging to individual customers. Bank management
is willing to experiment with different approaches because the
requirements are evolving rapidly. The best development approach for
this system is
A. Prototyping.
Page 5
RASHMI MAN.1DE
B. System development life cycle model.
C. Structured analysis and design technique.
D. Pilot operation.
WRONG! The correct choice is A . Prototyping (an experimental assurance process)
is costly and
time-consuming and thus is not currently the
most common approach.
It entails developing and putting into
operation successively more
refined versions of the system until sufficient
information is
obtained is obtained to produce satisfactory
design. Prototyping is
the best approach in this circumstances because
the requirements are
difficult to specify in advance and are likely
to change significantly
during development.
**********************************************************************
Questions # 12
Workwell Company operates in several regions, with each region
performing its data processing in a regional data center. The
corporate management information systems (MIS) staff has developed a
database management system to handle customer service and billing.
The director of MIS recommended that the new system be implemented
in the Southwestern Region to ascertain if the system operates in a
satisfactory manner. This type of conversion is called a
A. Parallel conversion.
B. Direct conversion.
C. Prototype conversion.
D. Pilot conversion.
WRONG! The correct choice is D . A modular conversion approach entails switching
to the new or improved
system in organizational (division, region,
product line, etc.)
segments or system segments (acounts
receivable, database, etc.). A
pilot conversion is one in which the final
testing and switchover are
accomplished at one segment or division of the
company.

**********************************************************************
Questions # 13
All of the following are included in the systems implementation
process except
A. Training.
B. Documentation.
Page 6
RASHMI MAN.1DE
C. Systems design.
D. Testing.

WRONG! The correct choice is C . The implementation phase of the systems

development life cycle
includes documentation of the system, testing,
training, and educating
system users, and conversion to the new system.
Systems design
precedes the implementation phase and thus is
not an element of the
systems implementation process.

**********************************************************************
Questions # 14
An accounting information system (AIS) must include certain source
documents in order to control purchasing and accounts payable. For a
manufacturing organization, the best set of documents should include
A. Purchase requisitions, purchase orders, inventory reports of goods
needed, and vendor invoices.
B. Purchase orders, receiving reports, and inventory reports of goods
needed.
C. Purchase orders, receiving reports, and vendor invoices.
D. Purchase requisitions, purchase orders, receiving reports, and
vendor invoices.
CORRECT An AIS is a subsystem of a mangement information system that

processes financial and transactional data relevant to managerial and
financial accounting. The AIS supports operations by collecting and
sorting data about an organizations's tranactions. An AIS is concerned
not only with external parties but also with internal activities
needed for managment decision making at all levels. A manufacturer
has well-defined reporting needs for routine information about
purchasing and payables. Purchase requisitions document user
department needs, and purchase orders provide evidence that purchase
transactions were appropriately authorized. A formal receiving
procedure segregates the purchasing and receiving functions and
establishes the quantity, quality, and timeliness of goods received.
Vendor invoices establish the liability for payment and should be
compared with the foregoing documents.
**********************************************************************
Questions # 15
Which one of the following input validation routines is not likely to
be appropriate in a real-time operation?
A. Sign check.
B. Reasonableness check.
C. Sequence check.
D. Redundant data check.
Page 7
RASHMI MAN.1DE
WRONG! The correct choice is C . All of the items refer to program controls to
prescreen or edit data
prior to processing, but the sequence check is
most likely to be used
only in batch processing. A sequence check
tests to determine that
records are in proper order. For example, a
payroll input file would
be sorted into Social Security number order. A
sequence check could
then be performed to verify record order. This
control would not
apply in a real-time operation because records
would not be processed
sequentially.
**********************************************************************
Questions # 16
EDP accounting control procedures are referred to as general controls
or application controls. The primary objective of application
controls in a computer environment is to
A. Maintain the accuracy of the inputs, files, and outputs for

specific applications.
B. Ensure the separation of incompatible functions in the data
processing departments.
C. Provide controls over the electronic functioning of the hardware.
D. Plan for the protection of the facilities and backup for the
systems.

CORRECT Application controls relate to specific tasks performed by the EDP
department. Their function is to provide reasonable assurance that
recording, processing, and reporting of data are performed properly.
Application controls are often categorized as input controls,
processing controls, and output controls.
**********************************************************************
Questions # 17
In an automated payroll processing environment, a department manager
substituted the time card for a terminated employee with a time card
for a fictitious employee. The fictitious employee had the same pay
rate and hours worked as the terminated employee. The best control
technique to detect this action using employee identification numbers
would be a:
A. Batch total.
B. Record count.
C. Hash total.
D. Subsequent check.
WRONG! The correct choice is C . A hash total of employee numbers would detect
Page 8
RASHMI MAN.1DE
such a substitution
although the termination had not yet been
recorded. A hash total is
otherwise meaningless control total, such as
the total of employee
numbers or invoice numbers, that is used to
verify data. Thus, the
hash total for the employee listing by the
personnel department could
be compared with the total generated during the
payroll run.
**********************************************************************
Questions # 18
A company employing an online computer system has CRT terminals
located in all operating departments for inquiry and updating
purposes. Many of the company's employee's have access to and are
required to use the CRT terminals. A control the company would
incorporate to prevent an employee from making an unauthorized change
to computer records unrelated to that employee's job would be to
A. Restrict the physical access to terminals.

B. Establish user codes and passwords.
C. Use validity checks.
D. Apply a compatibility test to transactions or inquiries entered by
the user.

CORRECT A compatibility test is an access control used to ascertain whether a
code number is compatible with the use to be made of the information
requested. For example, a user may be authorized to enter only
certain kinds of transaction data, to gain access only to certain
information, to have access to but not update files, or to use the
system only during certain hours.
**********************************************************************
Questions # 19
A critical aspect of a disaster recovery plan is to be able to regain
operational capability as soon as possible. In order to accomplish
this, an organization can have arrangement with its computer harware
vendor to have an fully operational facility available that is
configured to the user's specific needs. This is best known as a(n):
A. Uninterruptible power system.

B. Parallel system.
C. Cold site.
D. Hot site.

WRONG! The correct choice is D . A disaster recovery plan many include a

contract with an external
contingency facility vendor. Depending on the
organization's needs,
the contingency faciliy may be hot site or cold
site. A hot site is
Page 9
RASHMI MAN.1DE
an arrangement with a vendor for a fullly
operational facility that is
configured to the user's specific needs and
that will be available
within 24 hours. A hot site may also be fixed
or protable and is
recommended for an organization that cannot
afford for its computer
system to be down for even one day.

**********************************************************************
Questions # 20
Most of today's computer systems have hardware controls that are built
in by the computer manufacturer. Common hardware controls are:
A. Duplicate circuitry, echo check, and internal header lebels.

B. Tape file protection, cryptographic protection, and limit checks.
C. Duplicate circuitry, echo check, and dual reading.
D. Duplicate circuitry, echo eheck, tape file protection and internal
header lebels.
You have answered :

U Hv not Answered this. The correct choice is C . Hardware controls include parity
checks, echo checks, dual read-write
heads, dual circuitry,
diagnostic routines, boundary protection,
interlock, and a file protection
ring.
**********************************************************************
Questions # 21
Management has requested the internal auditor to perform an
operational audit of the telephone marketing operations of a major
division and recommend policies and procedures for improving
management control over the operation. The auditor should:
A. Accept the engagement but indicate to management that

recommending controls would impair audit independence so that
management knows that future audits of that area would be impaired.
B. Accept the engamgement because independence would not be
impaired.
C. Not accept the engagement because audit departments are
presumed to have expertise on accounting controls, not marketing
controls.
D. Not accept the engagement because recommending controls would
impair future objectivity of the department regarding this auditee.
CORRECT Independence would not be imparied since the internal auditor would
only recommend policies and procedures,not carrying them out.
Objectivity is considered to be impaired if the internal auditor
designs, installs, drafts procedures for or operates such systems.
Page 10
RASHMI MAN.1DE
**********************************************************************
Questions # 22
The internal auditing activity encounters a scope limitation from
senior management that will effect its ability to meet its goals and
objectives for a potential engagement client. The nature of the scope
limitation should be:
A. Noted in the engagement working papers, but the engagement should
be carried out as scheduled and the scope limitation worked around, if
possible.
B. Communicated to the external auditors so they can investigate the
area in more detail.
C. Communicated, preferably in writing, to the board.
D. Communicated to management stating that the limitation will not be
accepted because it would impair the internal audit activity's
independence.

WRONG! The correct choice is C . When the scope limitation comes from senior
management, it is
necessary to communicate this to the board.
Ideally, this
communication should be in writing, but it does
not need to be.
**********************************************************************
Questions # 23
A CAE has reviewed credientials, checked references, and interviewed a
candidate for a staff position. The CAE concludes that the candidate
has a thorough understanding of internal auditing techniques,
accounting, and finance. However, the candidate has limited knowledge
of economics and information technology. Which action is most
appropriate?
A. Reject the candidate because of lack of knowledge required by the

standards.
B. Offer the candidate a position despite lack of knowledge in certain
essential areas.
C. Encourage the candidate to obtain additional training in economics
and information technology and then reapply.
D. Offer the candidate a position if other staff members possess
sufficient knowlege in economics and information technology.

CORRECT It is not critical for every member of the IAA to be an expert or have
knowledge of every possible area that might be useful in an
engagement. As long as these skills already exist in the IAA, then
this individual may be hired without any issue.
**********************************************************************
Questions # 24
An internal auditor has some suspecion of, but no information about,
potential misstatement of financial statements. The internal auditor
has failed to exercise due professional care if he or she:
Page 11
RASHMI MAN.1DE
A. Identified potential ways in which a misstatement could occur and
ranked the items for investigation.
B. Informed the engagement manager of the suspecions and asked for
advice on how to proceed.
C. Did not test for possible misstatements because the engagement
work program had already been approved by management.
D. Expanded the engagement work program, without the engagement
client's approval, to address the highest ranked ways in which a
misstatement may have occured.

CORRECT Due professional care would require further testing of any potential
financial statement misstatements, even if they are outside the scope
of the existing engagement.

**********************************************************************
Questions # 25
The chief audit executive should develop and maintain a quality
assurance and improvement program that covers all aspects of the
internal audit activity and continuously monitors its effectiveness.
All of the following are included in a quality program except:
A. Annual appraisals of individual internal auditor's performance.

B. Periodic internal assessment.
C. Supervision.
D. Periodic external assessments.

CORRECT Though this would appear to be a function of quality, the annual

evaluation of the staff is an HR function. The other choices are all
specifically listed as part of a quality program.

**********************************************************************
Questions # 26
The interpretation related to quality assurance given by the Standards
is that
A. The internal audit activity is primarily measured against the
Institute's Code of Ethics.
B. External assessments can provide senior management and the board
with independent assurance about the quality of the internal audit
activity.
C. Continual supervision is limited to the planning, examination,
evaluation, communication, and follow-up process.
D. Appropriate follow-up to an external assessment is the
responsibility of the chief audit executive's immediate supervisor.
WRONG! The correct choice is B . External assessments can provide senior

mangement and the board with
independent assurance about the quality of
internal audit activity.
External assessments of an IAA should appraise
Page 12
RASHMI MAN.1DE
and express and
opinion as to the IAA's compliance with the
Standards for Professional
Practice of Internal Auditing and, as
appropriate, should include
recommendations for improvement.
**********************************************************************
Questions # 27
Integrity is an ethical requirement for all financial
managers/management accountants. One aspect of integrity requires
A. Performance of professional duties in accordance with applicable
laws.
B. Avoidance of conflict of interest.
C. Refraining from improper use of inside information.
D. Maintenance of an appropriate level of professional competence.

WRONG! The correct choice is B . According to the IMA Code of Ethics, financial
managers/management
accountants must "avoid actual or apparent
conflicts of interest and
advise all appropriate parties of any potential
conflict."

**********************************************************************
Questions # 28
Under the express terms of the IMA Code of Ethics, a financial
manager/management accountant may not
A. Advertise.
B. Encroach on the practice of another financial manager/management
accountant.
C. Disclose confidential information unless authorized or legally
obligated.
D. Accept other employment while serving as a financial
manager/management accountant.
CORRECT Financial managers/management accountants may not disclose

confidential information acquired in the course of their work unless
authorized or legally obligated to do so. They must inform
subordinates about the confedentiality of information and monitor
their actiities to maintain that confidentiality. Moreover, financial
managers/management accountants should avoid even the appearance
of using confidential information to their unethical or illegal
advantage.

**********************************************************************
Questions # 29
According to IMA Statement of Ethical Professional Practice, a
practitioner has a responsibility to recognize professional
Page 13
RASHMI MAN.1DE
limitations. Under which standard of ethical conduct would this
responsibility be included?
A. Competency.
B. Confidentiality.
C. Integrity.
D. Objectivity.
CORRECT One of the responsibilities of the financial manager/management
accountant under the competency standard is to "recognize and
communicate professional limitations or other constraints that would
preclude responsible judgment or successful performance of an
activity."

**********************************************************************
Questions # 30
At Key Enterprises, the controller is responsible for directing the
budgeting process. In this role, the controller has significant
influence with executive management as individual department budgets
are modified and approved. For the current year, the controller was
intrumental in the approval of a particular line manager's budget
without modification, even though significant reductions were made to
the budgets submitted by other line managers. As a token of
appreciation, the line manager in question has given the controller a
gift certificate for a popular local resturant. In considering
whether or not to accept the certificate, the controller should refer
to which section of IMA Statement of Ethical Professional Practice?
A. Competency.
B. Confedentiality.
C. Integrity.
D. Objectivity.

CORRECT The integrity standard requires the financial manager/management

accountant to refrain from engaging in any conduct that would
prejudice carrying out duties ethically.
**********************************************************************
Questions # 31
In accordance to IMA Statement of Ethical professional practice, a
management accountant who fails to perform professional duties in the
accordance with relevant standards is acting contrary to which one of
the following standards?
A. Competency.
B. Confedentiality.
C. Integrity.
D. Objectivity.
WRONG! The correct choice is A . According to IMA Statement of Ethical
Page 14
RASHMI MAN.1DE
Professional Practice, each
member has the responsibility to perform
professional duties in
accordance with relevant laws, regulations, and
technical standards.

**********************************************************************
Questions # 32
A managment accountant is expected to maintain truthfulness in all
analysis and communications and must disclose all necessary and
relevant information to outside auditors. Which of the following IMA's
overarching ethical principles does this relate to?
A. Honesty
B. Fairness
C. Objectivity
D. Responsibility

WRONG! The correct choice is A . As per IMA's overarching ethical priciples,

Honesty requires
conscientious application to the task at hand
and truthfulness in all
analyses and communication.
**********************************************************************
Questions # 33
The controller of the business has directed the CMA to overstate
ending WIP inventory on the balance sheet in order to meet the
budgeted net income figure. This would violate the IMA's ethical
standard(s) of:
A. Competence, confidentiality, integrity,, and credibility.

B. Integrity and credibility, but not competency or confedentiality.
C. Competency, integrity, and credibility, but not confedentiality.
D. Credibility and competency, but not integrity and confidentiality.
WRONG! The correct choice is C . This does not suggest that the confidentiality
standard has been put
at risk. Competency is violated because CMAs
must perform their
duties in accordance with relevent technical
standards. Integrity
appears violated because the activity
prejudices the CMA's ability to
carry out his duties ethically and discredits
management accounting as
a profession. Credibility appears to be
violated because WIP
inventory is not being communicated fairly and
objectively.
Page 15
RASHMI MAN.1DE
**********************************************************************
Questions # 34
John Walker, CMA, was hired by XYZ Inc. to work in material control.
The CFO told him not to inquire into the valuation of used parts
inventory. This action
A. Would be all right if a junior auditor does all the work.

B. Is permissible if it is a common practice in the industry.
C. May never be disclosed in litigation.
D. Should be reported to the the CFO's supervisor if the CFO will not
satisfactorily resolve the ethical dilemma.
CORRECT Choice D is the best answer according to IMA's resolution direction.

A is incorrect because CMA's have a duty to supervise subordinates to
ensure that they also adhere to IMA's code of ethics. B is not
correct because it is possible that an industry common practice may
violate the IMA's standards. C is not correct because CMA may be
compelled to testify in a lawsuit.

**********************************************************************
Questions # 35
XYZ corporation hired a CMA named Peter Russell to work in thier
internal audit department. Peter reviewed the sales department's
policy covering off-shore promotions and believes the company salesman
have been bribing foriegn officials to obtain business. This action
would seem to violate the IMA's ethical standard(s) of:
A. Credibility and integrity, but not competency and confidentiality.
B. Credibility, integrity, and confidentiality, but not competency.
C. Credibility and confidentiality, but not integrity or competency.
D. Credibility, integrity and competency, but not confidentiality.
CORRECT Competency is violated because there is requiremetn that professioal
duties must be performed in accordance with relevant laws including
FCPA. Integrity is at risk because this act would seem to prejudice
the company's personnel ability to carry out their duties ethically.
Credibility would be at risk because the knowledge that FCPA is being
violated may be relevant information that should be disclosed.
Confidentialy does not appear to be violated.

**********************************************************************
Questions # 36
The Sarbanes-Oxley Act has imposed restrictions on publicly-traded
corporations
I. Directors and officers may not trade in corporate stock.
II. Corporate loans to directors and officers are permissable if at a
market rate.
III. Incentive bonuses to directors and officers must be disgorged if
there is a subsequent restatement of financial statements for the
period in which the betterment was realized.
IV. The CEO and CFO must personally personally certify that the
financial statements fairly represent the corporate finanical position
Page 16
RASHMI MAN.1DE
and are prepared in accordance with GAAP.
Which of the above statements are true?
A. Only I and III are true.
B. Only II, III and IV are true.
C. Only III and IV are true.
D. Only I, III, and IV are true.
CORRECT I is false because there is not a ban on directors trading in
corporate stock as long as it is not during "black out" trading
periods. II is false because the new law creates a general ban on
direct or indirect corporate loans to directors and officers.

**********************************************************************
Questions # 37
The Sarbanes-Oxley Act has imposed restrictions on publicly traded
corporations.
I In 2004, the entire audit committee must be outsiders, not otherwise

involved in the corporation, or family members.
II. The audit committee must certify teh company's financial
statements are accurate and prepared in accordance with GAAP.
Which of the above statements are true or false?
I II
A. False False
B. False True
C. True False
D. True True

WRONG! The correct choice is C . I is true because because as of January 1,

2004, the entire audit
committee must be outsiders not otherwise
involved in the corporation
or family members. II is false because it is
the CEO and CFO, not the
audit committee, who must certify that the
financial statements fairly
represent the corporate financial position in
accordance with GAAP.
**********************************************************************
Questions # 38
Lawrence is in charge of auditing Zimbo Co. He determines Zimbo has a
control risk of 15%, there is an inherent risk of 30%, and he has an
acceptable detecton risk of 50%. What is the risk of a material
misstatement of an assertion?
A. 2.25%
B. 4.5%
C. 7.5%
D. 15%
Page 17
RASHMI MAN.1DE
CORRECT The audit risk model is sometimes useful in considering and planning
appropriate risk levels. The risk of material misstatement of an
assertion can be expressed algebraically as the product of inherent
risk, control, and the acceptable detection risk. Therefore, the risk
of material misstatement is 2.25% (15%x30%x50%).

**********************************************************************
Questions # 39
While performing an audit, Williams decides to restrict the risk of
misstatements to 3%. What must the acceptable level of detection risk
be if inherent risk is 25% and control risk is 40%?
A. 0.3%
B. 12%
C. 30%
D. 333%

CORRECT The acceptable level of detection risk is calculated by diving the

risk of material misstatement by the product of inherent risk and
control risk.
DR=AR/IRxCR or DR=3%/25%x40% = DR=30%.

**********************************************************************
Questions # 40
A document flowchart represents
A. The sequence of logical operations performed during the execution

of a computer program.
B. The possible combinations of alternative logic conditions and
corresponding courses of action for each condition in a computer
system.
C. The flow of data through a series of operations in an automated
data processing system.
D. The flow of forms that relate to a particular transaction through
an organization.

WRONG! The correct choice is D . A document flowchart graphically represents the
flow of forms
(documents) through a system that relate to a
given transaction, e.g.,
the processing of a customer's order. It shows
the source, flow,
processing, and final disposition of the
various copies of all related
documents.
Page 18
RASHMI MAN.1DE
**********************************************************************
Questions # 41
One characteristic of an effective internal control structure is the
proper segregation of duties. The combination of responsibilities
that would not be considered a violation of segration of functional
responsibilities is
A. Signing of paychecks and custody of blank payroll checks.
B. Preparation of paychecks and check distribution.
C. Approval of time cards and preparation of paychecks.
D. Timekeeping and preparation of payroll journal entries.
WRONG! The correct choice is D . Combining the timekeeping function and the
preparation of the payroll
journal entries would not be improper because
the employee has no
access to assets or to employee records in the
personnel department.
Only through collusion could an embezzlement be
perpetrated.
Accordingly, the functions of authorization,
record keeping, and
custodianship remain separate.
**********************************************************************
Questions # 42
One of the steps in assessing control risk in a computerized control
system is identifying necessary controls to prevent data from being
lost, addded, duplicated, or being altered during processing. An
example of this type of control is the
A. Authorization and approval of data in user departments and

screening of data by data control groups.
B. Review of data output by data control groups.
C. Use of external and internal file labels.
D. Use of control totals, limit and reasonableness checks, and
sequence tests.
WRONG! The correct choice is D . A control total is an application control that
may consist of a count
of the number of records processed at different
stages of the
operation. Comparison of the counts indicates
whether all records have
been processed or some have been added. A
control total might also
consist of a total of one information field for
all records processed,
such as total sales dollars for a batch of
sales invoices. A limit or
reasonableness check tests whether the value of
a field falls outside
a prescribed range. The range may be stated in
terms of an upper
limit, lower limit, or both. The loss,
Page 19
RASHMI MAN.1DE
addition, etc. of data may
result in an unreasonable value. A sequence
test verifies the
ordering of records and may therefore detect
various anomalies.

**********************************************************************
Questions # 43
Some account balances, such as those for pensions of leases, are the
results of complex calculations. The susceptibility of material
misstatemetns in these types of accounts is defined as
A. Audit risk
B. Detection risk
C. Sampling risk
D. Inherent risk
CORRECT Inherent risk is the susceptibility of an assertion to a material

misstatement in the absence of related controls. This risk is greater
for some assertions and related balances or classes than others. For
example, complex calculations are more likely to be misstated than
simple ones, and cash is more likely to be stolen than inventory of
coal. Inherent risk exists independently of the audit.
**********************************************************************
Questions # 44
Internal control can provide only reasonable assurance of achieving
entity control objectives. One factor limiting the likelihood of
achieving those objectives is that
A. The auditor's primary responsibility is the detection of fraud.
B. The boad of directors is active and independent.
C. The cost of internal control should not exceed its benefits.
D. Management monitors internal control.

CORRECT A limiting factor is that the cost of an entity's internal control
should not exceed the benefits that are expected to be derived.
Although the cost-benefit relationship is a primary criterion that
should be considered in designing internal control, the precise
measurement of costs and benefits usually is not possible.
**********************************************************************
Questions # 45
Internal controls may be prventive, detective, or corrective. Which
of the following is preventive?
A. Requiring two persons to pen mail.

B. Reconciling the accounts receivable subsidiary file with the
control account.
C. Using batch totals.
D. Preparing bank reconciliations.
Page 20
RASHMI MAN.1DE
WRONG! The correct choice is A . Preventive controls are designed to prevent an
error or an
irregularity. Assigning two individuals to
open mail is an attempt to
prevent misstatement of cash receipts.

**********************************************************************
Questions # 46
An example of the subject of an operational audit would be
A. The income tax return information of a manufacturer.

B. The performance statistics on the delivery of a city's services.
C. The verification of the dollar amount of royalties due to the
developer of a manufacturing process from the user of that process.
D. The 5-year revenue and expenses forecast by an entrepreneur
seeking to raise venture capital for his prospective operation.
You have answered :

U Hv not Answered this. The correct choice is B . An operational audit is designed

to evaluate the efficiency,
effectiveness, and economy of
managerial organization, performance,
and techniques. The only answer
choice that could fall into these
categories is performance
statistics (effectiveness) on the delivery
of services.
**********************************************************************
***********************************YOUR SCORE
REPORT********************************************
Correct Answer : 22
Incorect answer : 21
Unanswered : 3
Percentage correct : 48
Status: Sorry! you have failed to receive a passing score

************************** Our understanding of the
student**********************************
Dear RASHMI MAN
You have answered 53 percentage of Level A questions
and hence your basic understanding of the concepts needs improvement. Less than 85%
proficiency in this area is not acceptable. You need to view the class Videoes more
often and study the IMA textbooks followed by fast rehersal of the Participant
Guide
and the IPFC classnotes.
You have correctly answered 50 %age of Level B

Page 21
RASHMI MAN.1DE
questions and hence, you are NOT doing well with Level B questions. A score below
75%
in level B can be risky if you do not perform well in Level C and Essay areas.
You need to give yourself more time for solving the MCQs from IMA text and by doing
repetitive practice. You need to reach to 90% correction level in IMA examprep
questions. Presently, you are not performing well with questions that are slightly
more difficult than direct questions.
Since you have not attained the fundamental clarity level in Level A, this is
stopping
you from performing well in Level B.
YOu have correctly answered 29 %age of Level C
questions and hence you are NOT doing well with Level C questions. A score below 70%
in
level C can be risky if you do not perform well in Essay area.
You need to give yourself more time for solving the difficult MCQs and comprehensive
problems from IMA text/Software and by doing repetitive practice,You need to reach
to 90% correction level in IMA examprep questions. Presently, you are not performing
well with questions that require application of concepts,comprehension and

synthesis.
**********************************************************************
**********************************************************************
Area-wise strength-weakness report
**********************************************************************
Area No of Questions Correct Wrong %age correct
------------------------------------------------------------
Risk Assessment 10 5 5 50
Seg of Duties 3 2 1 67
FCPA 1 1 0 100
Types of IntCtr 2 1 1 50
Ctrl Activities 1 0 1 0
System Control 12 3 9 25
Ind &Objectivity 2 1 1 50
ProficincDueCare 2 2 0 100
QAIP program-IA 2 1 1 50
SarbanesOxleyAct 2 1 1 50
Profnl Ethics 9 5 4 56
**********************************************************************
********************************** BE WATCHFUL ABOUT UNANSWERED QUESTIONS

***********
You must answer all question by prudent guessing. Wrong answer has no -ve marking.
Your score would have at least improved by 1 had you
answered all unanswered questions with a common guess, say C
************************************************************************************
**
Page 22

Feedback - MOCKP1D2

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Feedback - MOCKP1D2

Uploaded by

Copyright:

Available Formats

RASHMI MAN.

MOCK TEST RESULT ANALYSYS

Student name: RASHMI MAN

You have answered : A

No of correct respondees to this question : 28 out of 45

No of correct respondees to this question : 30 out of 45

A. Internal auditors confirm customer accounts periodically.

You have answered : B

No of correct respondees to this question : 30 out of 45

You have answered : A

You have answered : D

Factors that best define the materiality of audit risk are:

You have answered : A

You have answered : D

CORRECT A prelisting of cash receipts in the form of checks is a preventive

You have answered :

U Hv not Answered this. The correct choice is B . Calculation of cost accounting

No of correct respondees to this question : 9 out of 45

No of correct respondees to this question : 21 out of 45

You have answered : A

WRONG! The correct choice is C . The implementation phase of the systems

No of correct respondees to this question : 25 out of 45

CORRECT An AIS is a subsystem of a mangement information system that

A. Maintain the accuracy of the inputs, files, and outputs for

You have answered : A

A. Restrict the physical access to terminals.

You have answered : D

No of correct respondees to this question : 12 out of 45

A. Uninterruptible power system.

You have answered : C

WRONG! The correct choice is D . A disaster recovery plan many include a

No of correct respondees to this question : 19 out of 45

A. Duplicate circuitry, echo check, and internal header lebels.

You have answered :

No of correct respondees to this question : 9 out of 45

A. Accept the engagement but indicate to management that

No of correct respondees to this question : 18 out of 45

You have answered : D

A. Reject the candidate because of lack of knowledge required by the

You have answered : D

You have answered : C

No of correct respondees to this question : 17 out of 45

A. Annual appraisals of individual internal auditor's performance.

You have answered : A

CORRECT Though this would appear to be a function of quality, the annual

No of correct respondees to this question : 19 out of 45

WRONG! The correct choice is B . External assessments can provide senior

You have answered : A

No of correct respondees to this question : 12 out of 45

CORRECT Financial managers/management accountants may not disclose

No of correct respondees to this question : 36 out of 45

No of correct respondees to this question : 17 out of 45

You have answered : C

CORRECT The integrity standard requires the financial manager/management

No of correct respondees to this question : 18 out of 45

You have answered : C

WRONG! The correct choice is A . As per IMA's overarching ethical priciples,

No of correct respondees to this question : 9 out of 45

A. Competence, confidentiality, integrity,, and credibility.

No of correct respondees to this question : 14 out of 45

A. Would be all right if a junior auditor does all the work.

CORRECT Choice D is the best answer according to IMA's resolution direction.

No of correct respondees to this question : 35 out of 45

No of correct respondees to this question : 19 out of 45