PHILIPPINE CHRISTIAN UNIVERSITY

OPERATIONAL AUDITING EXAMINATION

MAY 17, 2023

Name: _______________________________________
Professor: DR. RANDY NUÑEZ Score: ______

1. Internal audit works and is guided by a set of standards to ensure credibility, reliability
and quality of internal audit practitioners and their audit work. This professional
discipline called as

a. Code of Ethics
b. Audit Professionalism
c. Code of Standards
d. Corporate Governance

2. Statement 1: The chief audit executive must periodically review the internal audit
charter and present it to senior management and the board for approval.;

Statement 2: The internal audit activity must be independent, and internal auditors
must be objective in performing their work.

a. Statement 1: True; Statement 2: True

b. Statement 1: True; Statement 2: True
c. Statement 1: False; Statement 2: False
d. Statement 1: False; Statement 2: True

3. What is the most appropriate solution to resolve staff communication problems with
engagement clients?

a. Avoid unnecessary communication with engagement clients

b. Provide staff with sufficient training to enhance communication skills
c. Meet with engagement clients to resolve communication problems
d. Discuss communication problems with staff auditors

4. Which of the following pertains to performance standards?

a. Purpose, Authority and Responsibility

 b. Impairment to Independence or Objectivity
c. Direct Interaction with the Board
d. Control

5. Statement 1: The chief audit executive may state that the internal audit activity
conforms with the International Standards for the Professional Practice of Internal
Auditing only if the results of the quality assurance and improvement program support
this statement.;

Statement 2: When nonconformance with the Definition of Internal Auditing, the Code
of Ethics, or the Standards impacts the overall scope or operation of the internal audit
activity, the chief audit executive must disclose the nonconformance and the impact to
the external reviewer.

a. Statement 1: True; Statement 2: True

b. Statement 1: True; Statement 2: False
c. Statement 1: False; Statement 2: False
d. Statement 1: False; Statement 2: True

6. Code of Ethics: Shall not participate in any activity or relationship that may impair or be
presumed to impair their unbiased assessment. This participation includes those
activities or relationships that may be in conflict with the interests of the organization

a. Confidentiality
b. Objectivity
c. Competence
d. Integrity

7. Internal auditors should possess the knowledge, skills and other competencies essential
to their individual responsibilities. Consequently, all internal auditors should be
proficient in applying

a. Structured systems analysis

b. Management principles
c. Quantitative methods
d. Internal auditing standards.

8. Code of Ethics: Shall not accept anything that may impair or be presumed to impair their
professional judgment

a. Integrity
 b. Objectivity
c. Competence
d. Confidentiality

9. Is titled to aid an organizational mission as well as a guide to what the company stands
for and will uphold to its consumers.

a. Whistle blowing
b. Ethical Reporting
c. Corporate Social Responsibility
d. Corporate Governance

10. An independent, objective assurance and consulting activity designed to add value and
improvement an organization’s operations is called as

a. Compliance Audit
b. External Audit
c. Internal Audit
d. None of the above

11. Statement 1: Objectivity is presumed to be impaired if an internal auditor provides

assurance services for an activity for which the internal auditor had responsibility within
the previous year.;

Statement 2: The chief audit executive must obtain competent advice and assistance if
the internal auditors lack the knowledge, skills, or other competencies needed to
perform all or part of the engagement.

a. Statement 1: True; Statement 2: True

b. Statement 1: True; Statement 2: False
c. Statement 1: False; Statement 2: False
d. Statement 1: False; Statement 2: True

12. Is a formal document that defines the internal audit activity’s purpose, authority, and
responsibility

a. Engagement Letter
b. Code of Ethics
c. Definition of Internal Auditing
d. Internal Audit Charter
13. Auditing standards state that “reports may include recommendations for potential
improvements.” Which of the following would be a valid justification for omitting
recommendations in an audit report? The auditor:
a. Does not have sufficient time to formulate a recommendation due to audit budget
pressures
b. Can avoid the confrontation by letting management solve its own problems
c. May lose independence by being perceived as making operational decisions
d. May not always understand the true cause of the finding being reported.

14. Code of Ethics: Shall not use information for any personal gain or in any manner that
would be contrary to law or detrimental to legitimate and ethical objectives of the
organization

a. Integrity
b. Competence
c. Objectivity
d. Confidentiality

15. The end goal of internal auditing is to bring continuous improvement to the organization
and offer alternative solutions to better the conduct of business

a. Assurance and Consultancy

b. Designed to add value
c. Operational Effectiveness
d. Quality control

16. Mr. Astronomo is engaged to do internal services for DUMAS Co., while he is
independent to the engagement, he, however, performs the audit not in accordance
with the international standard for the professional practice in internal auditing. Mr.
Astronomo therefore violates the behavior of

a. Competence
b. Objectivity
c. Integrity
d. Integrity

17. The following are Mission and Purpose of the IA Department except

a. Implement the rules and policies established by the board and safeguarding assets
b. Review the reliability and integrity of financial information and the means used to
identify measure, classify, and report such information
 c. Review organization’s activities to determine whether it is efficiently and effectively
carrying out its function of controlling in accordance with management’s
instructions, policies, and procedures
d. Determine the adequacy and effectiveness of the system of internal controls in all
areas of activity

18. Internal auditors shall engage only in those services for which they have necessary
knowledge, skills and experience.

a. Integrity
b. Confidentiality
c. Competence
d. Objectivity

19. Which of the following actions by an internal auditor is most likely a violation of The IIA
Code of Ethics?

a. Accepting payment for teaching auditing at a local university

b. Allowing use of the Certified Internal Auditor designation in a context not involving
his/her employment
c. Having a material ownership interest in a competitor
d. Accepting a moderate gift from a customer of his/her organization

20. Statement 1: The audit committee must develop and maintain a quality assurance and
improvement program that covers all aspects of the internal audit activity.;

Statement 2: Internal assessments must be conducted at least once every five years by a
qualified, independent reviewer or review team from outside the organization.

a. Statement 1: True; Statement 2: True

b. Statement 1: True; Statement 2: False
c. Statement 1: False; Statement 2: False
d. Statement 1: False; Statement 2: True

21. An internal auditor for a large regional bank was asked to serve on the board of directors
of a local bank. The bank competes in many of the same markets as the regional bank
but focuses more on consumer financing than on business financing. In accepting this
position, the internal auditor;

I. Violates the IIA Code of Ethics because serving on the board may be in conflict with
the best interests of the internal auditor’s employer.;
 II. Violates the IIA Code of Ethics because the information gained while serving on the
board of directors of the local bank may influence recommendations regarding potential
acquisitions.
a. I only
b. II only
c. Neither I nor II
d. I and II

22. Code of Ethics: Shall respect and contribute to the legitimate and ethical objectives of
the organization

a. Confidentiality
b. Integrity
c. Competence
d. Objectivity

23. An internal auditor’s objectivity could be compromised in all of the following situations
except

a. A conflict of interest
b. Reliance on an outside service provider when appropriate
c. The internal auditor’s assumption of operational duties on a temporary basis
d. An engagement client’s familiarity with the internal auditor due to lack of rotation in
assignments

24. The reporting structure that is most likely to allow the internal audit activity to
accomplish its responsibilities is to report administratively to the

a. Chief executive officer and functionally to the board of directors

b. Chief executive officer and functionally to the external auditor
c. Controller and functionally to the chief financial officer
d. Board and functionally to the chief executive officer

25. Is a formal document that defines the internal audit activity’s purpose, authority, and
responsibility.

a. Definition of Internal Auditing

b. Internal Audit Charter
c. Engagement Letter
d. Code of Ethics
26. Internal audit definition, audit objectives must be carried out in unbiased manner and
free from influence of management.

a. Assurance and consulting activity

b. Independence
c. Designed to add value
d. Systematic approach

27. The following are hallmarks of professionalism except

a. Common Body of Knowledge

b. Training Ppgramme
c. Code of Ethics
d. Risk Management

28. Statement 1: Final approval of the internal audit charter resides with the chief audit
executive.;

Statement 2: The internal audit activity must be influenced by the management

especially in determining the scope of internal auditing, performance delivery, and
communicating results.

a. Code of Ethics
b. Internal Audit Charter
c. Internal Audit Plan
d. Internal Audit Program

29. It is a formal written statement that defines the approved purpose, and responsibility of
the internal audit activity

a. Code of Ethics
b. Internal Audit Charter
c. Internal Audit Plan
d. Internal Audit Program

30. Statement 1: Internal auditors must enhance their knowledge, skills, and other
competencies through continuing professional development.;

Statement 2: Internal auditors must apply the care and skill expected of a reasonably
prudent and competent internal auditor that guarantees infallibility.
 a. Statement 1: True; Statement 2: True
b. Statement 1: True; Statement 2: False
c. Statement 1: False; Statement 2: False
d. Statement 1: False; Statement 2: True

31. Statement 1: The chief audit executive must confirm to the chief executive officer, at
least annually, the organizational independence of the internal audit activity.;

Statement 2: If independence or objectivity is impaired in fact or appearance, the details

of the impairment must be disclosed to appropriate parties.

a. Statement 1: False; Statement 2: True

b. Statement 1: True; Statement 2: False
c. Statement 1: True; Statement 2: True
d. Statement 1: False; Statement 2: False

32. All of the following are internal audit activity except.

a. Reliability and Integrity of Financial Operation and Information

b. Sound Risk Management
c. Reliability and Integrity of Financial Operation and Information
d. Safeguarding of Assets

33. Means action and decisions of the board may be assessed and be given measure

a. Accountability
b. Transparency
c. Fairness
d. Responsibility

34. Code of Ethics: Shall disclose all material facts known to them that, if not disclosed, may
distort the reporting of activities under review

a. Confidentiality
b. Objectivity
c. Integrity
d. Competence

35. What will be your approach to audit the operations of the Company based on your
assessment of the risk maturity?
 a. Promote risk management and rely on alternative audit planning method
b. Promote enterprise-wide approach to risk management
c. Use assessment of risk management as appropriate
d. Audit risk management processes and use management assessment of risk
appropriate

36. After assessment of risk maturity, periodic audit planning is done which results to the
production of:

a. Audit report
b. Planning report
c. Audit plan
d. Risk register

37. These are fundamental principles and procedures that make internal auditing a unique,
disciplined and systematic activity.

a. Performance Standards
b. Code of Ethics
c. Attribute Standards
d. Internal Auditing Standards

38. Which of the following is not a category of fraud?

a. Undiscovered
b. Known and recorded publicly
c. Conspiracy
d. Known and recorded internally

39. Which of the following actions would be a violation of auditor independence?

a. Continuing an audit assignment at a division for which the auditor will soon be
responsible as the result of promotion
b. Reviewing a purchasing agent’s contract drafts prior to their execution
c. Reducing the scope of an audit due to budget restrictions
d. Participating on a task force which recommends standards for control of a new
distribution system
40. Code of Ethics: Shall be prudent in the use and protection of information acquired in the
course of their duties

a. Confidentiality
b. Objectivity
c. Competence
d. Integrity

41. It is a type of Operational Audit which deals with process, quality, safety, risk,
environment control techniques, etc., and is generally initiated at the request of the
management for varied purposes.

a. Functional
b. Special Assignments
c. Systems Monitoring
d. None of the Above

42. The following are tools in Operations Audit, except

a. Risk - Bases Approach

b. Process Approach
c. Systems Monitoring
d. None of the above

43. The following performs Operations Audit, except

a. CPA/Firms/External Auditors
b. Government Auditors
c. Consultants
d. None of the above

44. The following are reasons necessitating Operations Audit, except:

a. Management may need the auditor’s analysis and objective report to sell changes to
upper management
b. Management does not see the need for the change
c. All of the above
d. None of the above
45. It is an Operations Audit Tool performed by company personnel/process owners who
are held accountable for execution, monitoring and improving the business process in
question.

a. Value – for – Money Approach

b. Risked – Based Approach
c. Control – Self – Assessment
d. None of the above

46. IPPF Standard 2120.A1 of the Institute of Internal Auditors on "Risk Management" states
that "The internal audit activity must evaluate risk exposure relating to the
organization's governance, operations and information systems regarding the…"
following, except

a. Effectiveness and efficiency of financial and operational information

b. Compliance with laws, regulations and contracts
c. Safeguarding assets
d. None of the above

47. Operational Audit focuses on

a. Financial Reporting objectives such as GAAP

b. Corporate standards of business conduct, internal policies; specific laws and
regulations
c. Mission, Vision and Objectives of the Organization and its management
d. All of the above

48. Internal Auditing as defined by the Institute of Internal Auditors (IIA) is an independent,
objective assurance and consulting activity designed to add value and improve an
organization's operations. It helps an organization accomplish its objectives by bringing a
systematic, disciplined approach to evaluate and improve the effectiveness of Risk
Management, Control and __________

a. Business Operations
b. Governances Processes
c. All of the above
d. None of the above

49. The objective of Operational Audit is to evaluate and improve the effectiveness,
efficiency and __________ of operations.
 a. Economy
b. Economics
c. Quality and Quantity
d. All of the above

50. One of the 6 E's of Operational Audit, it refers to performing tasks with reasonable effort
(doing things the right way); ratio of actual inputs to actual outputs.

a. Economy
b. Efficiency
c. Effectiveness
d. Equity

- END OF EXAMINATION -