1 34 Internal

1. Which of the following best describes the objective of internal auditing? a. To assist members of the organization in the effective discharge of their responsibilities  b. To assist management with with the design and implementation implementation of accounting accounting and control systems systems c. To examine and evaluate an organization's organization's accounting system as a service to management d. To monitor the organization's internal control system for the external auditors . !ccording the the "tatement of #esponsibilities #esponsibilities of $nternal !uditing% !uditing% which of the following is not included in the scope of the internal audit function? a. !ppraising the economy and efficiency with which resources are employed  b. #eviewing the strategic strategic management process% assessing assessing the &uality of management management decision maing  both &uantatively &uantatively and &ualitatively% &ualitatively% and reporting the results to the audit committee committee c. #eviewing the means of safeguarding assets and% as appropriate% verifying the existence of such assets d. #eviewing operations or programs to ascertain whether results are consisten with established objectives and goals and whether the operations or programs are being carried out as planned. (. )f the following% which is the major objective of The $nstitue of $nternal !uditors? !uditors? a. *ultivate% promote and disseminate information concerning internal auditing and related subjects  b. )versee the activities activities of internal auditors auditors c. +romulgate standards that must be followed by all corporations d. $nvestigate accusations that *ertified $nternal !uditors have violated The $ nstitute of $nternal !uditors *ode of ,thics -. )ne of the purposes of the "tandards for the +rofessional +ractice of $nternal !uditing !uditing as stated in the $ntroduction to the "tandards is to a. ,ncourage the professionalization professionalization of internal auditing  b. ,stablish the independence independence of the internal internal audit department and emphasize the objectivity objectivity of internal auditing c. ,ncourage external auditors to mae more extensive use of the wor of internal auditors d. ,stablish the basis for guidance and measurement of internal auditing performance . Which of the following statements does not describe one of the purposes of The $$! *ode of ,thics? The $$! *ode of ,thics a. "ets forth basic principles in the practice of internal auditing  b. *harges $$! members to maintain high high standards of conduct c. ,xplains the internal audit profession's responsibility responsibility to society at large d. "tates that a distinguishing mar of a profession is acceptance by its members of responsibility to those it serves /. $ndependence permits internal auditors to render impartial and unbiased judgments. The best way to achieve independence is through a. $ndividual nowledge and sills  b. )rganizational )rganizational status and objectivity objectivity c. "upervision within the organization d. )rganizational nowledge and sills 0. Which of the following is considered a major reason for establishing an internal audit function? a. To relieve overburdened management of the responsibility for establishing an effective control structure  b. To safeguard resources entrusted to the organization c. To ensure the accuracy% reliability and timeliness of financial and operating data used in managment's decision maing d. To assist members of the organization in the measurement and evaluation of the effectivenss of the established internal control structure . The internal auditor's responsibility for the prevention of fraud includes all of the following except a. 2etermining if the organizational environment fosters control consciousness  b. ,nsuring that fraud will not occur  c. 3eing aware of activities in which fraud is liely to occur  d. ,valuating the effectiveness of actions taen by management to deter fraud 4. The internal auditing profession is believed to have advanced primarily as a conse&uence of  a. $ncreased interest by graduating students and experienced auditors  b. The limitation of external audit scope c. 5ob &ualification specifications that include added emphasis on bacground nowledge and sills d. $ncreased complexity and sophistication of business operations 16. The audit committee can serve several important purposes% some of which directly benefit internal auditing. The most significant benefit provided by the audit committee to the internal auditor is a. +rotecting the independence of the internal auditor from undue management influence  b. #eviewing annual audit plans and monitoring audit results c. !pproving audit plans% scheduling% staffing and meeting with the internal auditor as needed d. #eviewing copies of the procedures manuals for selected company operations and meeting with company officials to discuss them 11. Which of the following best describes and internal auditor's purpose in reviewing the ade&uacy of the system of internal control? a. To help determine the nature% timing and extent of tests necessary to achieve audit objectives  b. To ensure that material weanesses in the internal control system are corrected c. To determine whether the internal control system provides reasonable assurance that the organization's objectives and goals are met efficiently and economically d. To determine whether the internal control system ensures that the accounting records are correct and that financial statements are fairly stated 1. !ccording to the "tatement of #esponsibilities% the authority of the internal auditing department is limited to that granted by a. The board of directors and the controller   b. "enior management and the "tandards c. 7anagement and the board of directors d. The audit committee and the chief financial officer  . ! company's new president meets the director of internal auditing for the first time and ass the director to  briefly describe the department's overall responsibility. The director states that internal auditing's overall responsibility is to a. !ct an an independent appraisal function to review operations as a service to management by measuring and evaluating the effectiveness of controls  b. #eview the means of safeguarding assets and% as appropriate% verify the existence of such assets c. ,nsure compliance with policies% plans% procedures% laws and regulations that could have a significant impact on operations and reports d. #eview the reliability and integrity of financial and operating information and the means used top identify% measure% classify and report such informtion (. ! charter is being drafted for a newly formed internal auditing department. Which of the following best describes the appropriate opganizational status that should be incorporated into the charter? a. The director of internal auditing should report to the chief executive officer but have access to the board of directors  b. The director of internal auditing should be a member of the audit committee of the board of directors c. The director of internal auditing should be a staff officer reporting to the chief financial officer  d. The director of internal auditing should report to an administrative vice president -. 8nder "tandard 116% the purpose% authority and responsibility of the internal audit department should be defined in a formal written document 9charter:. ! written charter% approved by the board of directors% is  primarily meant to enhance the department's a. 2ue professional care  b. "tature within the organization c. #elationship with management d. $ndependence . !n auditor's objectivity could be compromised in all of the following situations except a. ! conflict of interest  b. !uditee familiarity with auditor due to lac of rotation in assignments c. !uditor assumption of operational duties on a temporary basis d. #eliance on outside expert opinion when appropriate /. !ccording to the "tandards% internal auditors should review the means of physically safeguarding assets from losses arising from a. 7isapplication of accounting principles  b. +rocedures that are not cost justified c. ,xposure to the elements d. 8nderusage of physical facilities 0. $n conducting an appraisal of the economy and efficiency with which resources are employed% an internal auditor is responsible for  a. 2etermining whether operating standards have been established  b. ;erifying the existence of assets c. #eviewing the reliability of operating information d. ;erifying the accuracy of asset valuation . !ccording to the "tandards% an internal auditor's role with respect to operating objectives and goals includes a. !pproving the operating objectives or goals to be met  b. 2etermining whether underlying assumptions are appropriate c. 2eveloping and implementing control procedures d. !ccomplishing desired operating program results 4. The "tandards re&uire that the internal audit director establish and maintain a &uality assurance program to evaluate the operations of the internal audit department. !ll of the following are considered elements of a &uality assurance program except a. !nnual appraisals of individual internal auditors' performance  b. $nternal reviews of audits completed c. "upervision of audit wor  d. ,xternal reviews to assess compliance with standards 16. !s used in the "tandards when discussing audit planning or ris assessment% the term ris is best defined as the probability that a. !n internal auditor will fail to detect a material error or event that causes financial statements or internal reports to be misstated or misleading  b. !n event or action my adversely affect the organization c. 7anagement will% either nowingly or unnowingly% mae decisions that increase the potential liability of the organization d.
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1. Which of the following best describes the objective of internal auditing?

a. To assist members of the organization in the effective discharge of their responsibilities
b. To assist management with the design and implementation of accounting and control systems
c. To examine and evaluate an organization's accounting system as a service to management
d. To monitor the organization's internal control system for the external auditors
2. According the the Statement of Responsibilities of Internal Auditing, which of the following is not
included in the scope of the internal audit function?
a. Appraising the economy and efficiency with which resources are employed
b. Reviewing the strategic management process, assessing the quality of management decision making
both quantatively and qualitatively, and reporting the results to the audit committee
c. Reviewing the means of safeguarding assets and, as appropriate, verifying the existence of such assets
d. Reviewing operations or programs to ascertain whether results are consisten with established objectives
and goals and whether the operations or programs are being carried out as planned.
3. Of the following, which is the major objective of The Institue of Internal Auditors?
a. Cultivate, promote and disseminate information concerning internal auditing and related subjects
b. Oversee the activities of internal auditors
c. Promulgate standards that must be followed by all corporations
d. Investigate accusations that Certified Internal Auditors have violated The Institute of Internal Auditors
Code of Ethics
4. One of the purposes of the Standards for the Professional Practice of Internal Auditing as stated in the
Introduction to the Standards is to
a. Encourage the professionalization of internal auditing
b. Establish the independence of the internal audit department and emphasize the objectivity of internal
auditing
c. Encourage external auditors to make more extensive use of the work of internal auditors
d. Establish the basis for guidance and measurement of internal auditing performance
5. Which of the following statements does not describe one of the purposes of The IIA Code of Ethics?
The IIA Code of Ethics
a. Sets forth basic principles in the practice of internal auditing
b. Charges IIA members to maintain high standards of conduct
c. Explains the internal audit profession's responsibility to society at large
d. States that a distinguishing mark of a profession is acceptance by its members of responsibility to those
it serves
6. Independence permits internal auditors to render impartial and unbiased judgments. The best way to
achieve independence is through
a. Individual knowledge and skills
b. Organizational status and objectivity
c. Supervision within the organization
d. Organizational knowledge and skills

The limitation of external audit scope c. Ensuring that fraud will not occur c. The internal auditing profession is believed to have advanced primarily as a consequence of a. To help determine the nature. Evaluating the effectiveness of actions taken by management to deter fraud 9. To relieve overburdened management of the responsibility for establishing an effective control structure b.7. timing and extent of tests necessary to achieve audit objectives b. Which of the following best describes and internal auditor's purpose in reviewing the adequacy of the system of internal control? a. To determine whether the internal control system ensures that the accounting records are correct and that financial statements are fairly stated 1. To ensure the accuracy. Job qualification specifications that include added emphasis on background knowledge and skills d. Being aware of activities in which fraud is likely to occur d. The most significant benefit provided by the audit committee to the internal auditor is a. Protecting the independence of the internal auditor from undue management influence b. reliability and timeliness of financial and operating data used in managment's decision making d. The audit committee can serve several important purposes. Increased interest by graduating students and experienced auditors b. To ensure that material weaknesses in the internal control system are corrected c. According to the Statement of Responsibilities. scheduling. Increased complexity and sophistication of business operations 10. Approving audit plans. The internal auditor's responsibility for the prevention of fraud includes all of the following except a. To assist members of the organization in the measurement and evaluation of the effectivenss of the established internal control structure 8. Determining if the organizational environment fosters control consciousness b. To determine whether the internal control system provides reasonable assurance that the organization's objectives and goals are met efficiently and economically d. To safeguard resources entrusted to the organization c. staffing and meeting with the internal auditor as needed d. Which of the following is considered a major reason for establishing an internal audit function? a. some of which directly benefit internal auditing. Reviewing copies of the procedures manuals for selected company operations and meeting with company officials to discuss them 11. Reviewing annual audit plans and monitoring audit results c. the authority of the internal auditing department is limited to that granted by .

internal auditors should review the means of physically safeguarding assets from losses arising from a. The director states that internal auditing's overall responsibility is to a. In conducting an appraisal of the economy and efficiency with which resources are employed. Exposure to the elements d. The director of internal auditing should report to the chief executive officer but have access to the board of directors b. the purpose. Auditor assumption of operational duties on a temporary basis d. Management and the board of directors d. Auditee familiarity with auditor due to lack of rotation in assignments c. Under Standard 110.a. Independence 5. Which of the following best describes the appropriate opganizational status that should be incorporated into the charter? a. Review the means of safeguarding assets and. measure. The director of internal auditing should be a member of the audit committee of the board of directors c. approved by the board of directors. Act an an independent appraisal function to review operations as a service to management by measuring and evaluating the effectiveness of controls b. authority and responsibility of the internal audit department should be defined in a formal written document (charter). An auditor's objectivity could be compromised in all of the following situations except a. Ensure compliance with policies. A written charter. plans. Review the reliability and integrity of financial and operating information and the means used top identify. A conflict of interest b. The audit committee and the chief financial officer 2. Stature within the organization c. an internal auditor is responsible for . Senior management and the Standards c. Due professional care b. Underusage of physical facilities 7. A charter is being drafted for a newly formed internal auditing department. Procedures that are not cost justified c. as appropriate. is primarily meant to enhance the department's a. Misapplication of accounting principles b. classify and report such informtion 3. The director of internal auditing should report to an administrative vice president 4. The board of directors and the controller b. laws and regulations that could have a significant impact on operations and reports d. A company's new president meets the director of internal auditing for the first time and asks the director to briefly describe the department's overall responsibility. verify the existence of such assets c. According to the Standards. Reliance on outside expert opinion when appropriate 6. Relationship with management d. The director of internal auditing should be a staff officer reporting to the chief financial officer d. procedures.

Management will. Internal auditing involves evaluating compliance with policies. Internal auditing has evolved to more of an operational orientation from a strictly financial orientation . Developing and implementing control procedures d. Determining whether operating standards have been established b.a. An internal auditor will fail to detect a material error or event that causes financial statements or internal reports to be misstated or misleading b. the term risk is best defined as the probability that a. Supervision of audit work d. make decisions that increase the potential liability of the organization d. External reviews to assess compliance with standards 10. All of the following are considered elements of a quality assurance program except a. Approving the operating objectives or goals to be met b. Verifying the existence of assets c. laws and regulations c. Financial statements and/or internal records will contain material error 11. An event or action my adversely affect the organization c. Reviewing the reliability of operating information d. According to the Standards. Which of the following best describes the scope of internal auditing as it has developed to date? a. Internal reviews of audits completed c. Internal auditing involves appraising the economy and efficiency with which resources are employed b. Annual appraisals of individual internal auditors' performance b. Internal auditing is a dynamic profession. either knowingly or unknowingly. Accomplishing desired operating program results 9. plans. The Standards require that the internal audit director establish and maintain a quality assurance program to evaluate the operations of the internal audit department. As used in the Standards when discussing audit planning or risk assessment. Verifying the accuracy of asset valuation 8. an internal auditor's role with respect to operating objectives and goals includes a. Internal auditing has evolved to verifying the existence of assets and reviewing the means of safeguarding assets d. procedures. Determining whether underlying assumptions are appropriate c.

A Certified Internal Auditor. Require members of the profession to exhibit loyalty in all matters pertaining to the affairs of their organization 2. The reasonable assurance that compliance does exist d. believed that toxic waste was being dumped in violation of the law. Is the auditor in compliance with the Standards? a. The conduct of extensive examinations c. No. Identify the association's primary purpose for establishing the code of ethics. honesty and dignity within the association b. No. An accounting association established a code of ethics for all members. To outline criteria for professional behavior to maintain standards of competence. the auditor notes in the working papers that controls over receipts are adequate. The auditor . Honesty. To establish standards to follow for effective accounting practice c. The auditor worked with the clerk several years before and has a high level of trust in the individual. alertness to conditions where irregularities are most likely was not shown d. A primary purpose for establishing a code of conduct within a professional organization is to a. Punctuality. The consideration of the possibility of material irregularities 4. These qualities are a. Out of loyalty to the company. The Code of Ethics requires IIA members to exercise three particular qualities in the performance of their duties. To outline criteria that can be used in conducting interviews of potential new accountants 3." This statement makes which of the following unnecessary? a. Accordingly. Demonstrate acceptance of responsibility to the interests of those served by the profession d. morality.1. irregularities were not noted c. the working papers were annotated 5. "Due care implies reasonqble care and competence. Yes. To provide a framework within which accounting policies can be effectively developed and executed d. working for a chemical manufacturer. objectivity and dilegence b. sobriety and clarity c. loyalty and dignity 6. Ensure that all members of the profession perform at approximately the same level of competence c. no evidence regarding the dumping was collected. not infallibility or extraordinary performance. Timeliness. skill and discipline d. The conduct of examinations and verifications to a reasonable extent b. Knowledge. An internal auditor observes that a receivables clerk has physical access to and control of cash receipts. reasonable care has been taken b. Yes. Reduce the likelihood that members of the profession will be sued for substandard work b. a.

Violated the Code of Ethics by failing to protect the well-being of the general public c. an auditor discovers that a clerk is embezzling company funds. the internal auditing department will be run strictly by the director's standards. Lack of competence in this area d. Henceforth. During the course of an audit. Serving as consultants to competitor organizations c. Although this is the first embezzlement ever encountered and the organization has a security department. Internal auditor and adjunct faculty member of local business college that educates potential employees d. Internal auditors should be prudent in their relationships with persons and organizations external to their employers. The auditors should adopt suitable means to comply with the Standards c. the auditor decides to personally interrogate the suspect. what is the best course of action for the staff members? a. The auditors must exhibit loyalty to the organization and ignore the Standards d. Failing to show due diligence b. Conclusive evidence of wrongdoing was not gathered 7. Which of the following activities is least likely to affect internal auditors' ethical behavior adversely? a. Loyalty to the employer in all matters is required d. b. Internal auditor and a well-known charitable organization's local in-house chairperson b. but they are not CIAs. According to the Code of Ethics. Serving as consultants to suppliers d. The Code does not apply because the auditors are not CIAs. Did not violate the Code of Ethics.a. Failing to comply with the law 10. the rule violated is most likely a. Violated the Code of Ethics by knowingly becoming a party to an illegal act b. not The IIA's. Accepting compensation from professional organizations for consulting work b. Did not violate the Code of Ethics. Internal auditor and landlord of apartment buildings that publicly advertise for tenants in local newspapers listing monthly rental fees 8. Discussing audit plans or results with external parties 9. The auditors must resign their jobs to avoid improper activities . Lack of loyalty to the organization c. Internal auditor and part-time business insurance broker c. All four staff members are members of The Institute. An organization has recently placed a former operating manager in the position of director of internal auditing. If the auditor is violating the Code of Ethics. The new director is not a member of The IIA and is not a CIA. Which of the following concurrent occupations could appear to subvert the ethical behavior of an internal auditor? a.

Be assessed a fine not to exceeed $1. A CIA learned that certain individuals in the organization were involved in industrial espionage for the benefit of the organization. Be required to retake the CIA examination c. Which of the following describes the disciplinary action most likely to be imposed by The IIA? The CIA will a. Report the facts to the appropriate individual within the organization b. A CIA is found to have committed a very serious violation of the Code of Ethics of The IIA.000 . Be required to take up to 40 hours of appropriate continuing professional education courses b. According to the Code of Ethics.11. identify the auditor's course of action. No action is required because this condition is not detrimental to the organization c. Note the condition in the working papers but refrain from reporting it because it benefits the organization d. Report the condition to the appropriate government regulatory agency 12. Forfeit his or her membership in The Institute d. a. During an audit.