NEW QUESTION 1
Which of the following situations is most likely to impair internal audit objectivity?

• A. An internal auditor reports both functionally and administratively to the chief financial officer (CFO).
• B. An internal auditor, who was an accounts receivable intern for the organization three years prior, performs an audit of the accounts receivable cycle.
• C. According to policy, the internal auditor must obtain approval from the CFO prior to requesting information for internal audit purposes.
• D. An internal auditor performs an audit in a department that is led by the auditor's close friend.

Answer: D

NEW QUESTION 2
Which of the following are generally recognized as essential elements of a corporate social responsibility program?

• A. Human rights and the environment.
• B. Organizational governance and financial reporting.
• C. Fair operating practices and government regulation.
• D. Consumer issues and return on investment.

Answer: A

NEW QUESTION 3
According to the International Professional Practices Framework, which of the following are allowable activities for an internal auditor?
* 1. Advocating the establishment of a risk management function.
* 2. Identifying and evaluating significant risk exposures during audit engagements.
* 3. Developing a risk response for the organization if there is no chief risk officer.
* 4. Benchmarking risk management activities with other organizations.
* 5. Documenting risk mitigation strategies and techniques.

• A. 4 and 5 only.
• B. 1.2, and 3 only.
• C. 1.2. 4. and 5 only.
• D. 2. 3. 4. and 5 only.

Answer: C

NEW QUESTION 4
Forty-five percent of an organization's customer payments are submitted online. Eight percent of online payments are rejected. Executive management decides to outsource its online payment services to a contractor that will assume 75 percent of the total value of rejected payments. The organization estimates $1.25 million customer payments due during the contract period.
Which of the following represents the organization's residual risk for online customer payments due?

• A. $11, 250
• B. $25, 000
• C. $33, 750
• D. $45, 000

Answer: A

NEW QUESTION 5
A medical insurance provider uses an electronic claims-submission process and suspects that a number of physicians have submitted claims for treatments that were not performed. Which of the following control procedures would be most effective to detect this type of fraud?

• A. Require the physician to submit a signed statement attesting that the treatments had been performed.
• B. Send confirmations to the physicians, requesting them to verify the exact nature of the claims submitted to the insurance provider.
• C. Develop an integrated test facility and submit false claims to verify that the system is detecting such claims on a consistent basis.
• D. Use computer software to identify abnormal claims based on the insured's age and medical history.

Answer: D

NEW QUESTION 6
Sometimes, internal audit staff may partner with operating managers to rank risks. Which of the following outcomes may be the most beneficial aspects of this strategy?
* 1. Reappraising risks levels.
* 2. Providing accurate information to management.
* 3. Marketing the internal audit activity.
* 4. Planning safeguards for assets in high-risk areas.

• A. 1 and 2.
• B. 1 and 3.
• C. 2 and 3.
• D. 3 and 4.

Answer: B

NEW QUESTION 7
A large trucking organization wants to reduce traffic accidents by improving its system of internal controls. Which of the following controls is correctly classified?
* 1. Review of speeding violations to identify repetitive locations and drivers is an example of a preventive control.
* 2. Defensive driver training is an example of a directive control.
* 3. The installation of tracking devices in delivery vehicles is an example of a corrective control.
* 4. Providing a vehicle driver handbook is an example of a detective control.

• A. 1 and 2.
• B. 1 and 4.
• C. 2 and 3.
• D. 3 and 4.

Answer: A

NEW QUESTION 8
A new internal audit activity is creating its first charter. According to IIA guidance, which of the following objectives would be appropriate for inclusion in the charter?

• A. Continuously monitor the organization's overall risk activities in relation to its risk appetite.
• B. Evaluate the adequacy and effectiveness of the organization's governance activities.
• C. Oversee the establishment and administration of an effective risk management program.
• D. Assist management in implementing recommended control improvements.

Answer: C

NEW QUESTION 9
Which of the following enhances the independence of the internal audit activity?

• A. The chief audit executive (CAE) approves the annual internal audit plan.
• B. The CAE administratively reports to the board.
• C. The audit committee approves the CAE's annual salary increase.
• D. The chief executive officer approves the internal audit charter.

Answer: C

NEW QUESTION 10
Which of the following factors should be considered when determining the appropriate combination of manual techniques and computer-assisted audit techniques (CAATs) to be used during an audit?
* 1. Acceptance of CAATs findings by entity management.
* 2. Computer knowledge and expertise of the auditor.
* 3. Time constraints.
* 4. Level of audit risk.

• A. 1 and 4
• B. 2 and 3 only
• C. 1, 2, and 3
• D. 2, 3, and 4

Answer: D

NEW QUESTION 11
An organization has implemented a software system that requires a supervisor to approve transactions that would cause treasury dealers to exceed their authorized limit. This is an example of which of the following types of controls?

• A. Preventive controls.
• B. Detective controls.
• C. Soft controls.
• D. Directive controls.

Answer: A

NEW QUESTION 12
Which of the following is true regarding the use of a formal risk management framework?
* 1. It facilitates a methodical approach to risk mitigation.
* 2. It defines and standardizes the terminology used in risk communication.
* 3. It establishes the risk tolerance levels to be accommodated in the strategy.
* 4. It facilitates the alignment of risk mitigation strategies with management priorities.

• A. 1.2, and 3.
• B. 1,2, and 4.
• C. 1.3, and 4.
• D. 2. 3, and 4.

Answer: B

NEW QUESTION 13
An internal audit charter should do which of the following?

• A. Outline the schedule of future audits.
• B. Define the scope of internal audit activities.
• C. Establish the size of the internal audit activity.
• D. Communicate the internal audit activity's goals.

Answer: B

NEW QUESTION 14
Which of the following is an example of a management control technique?

• A. A budget.
• B. A risk assessment.
• C. The board of directors.
• D. The control environment.

Answer: A

NEW QUESTION 15
According to IIA guidance, which of the following best describes internal auditors' responsibility regarding fraud?

• A. Internal auditors should take a leading role in investigating all fraud-related cases.
• B. Internal auditors must have sufficient knowledge to evaluate the risk of fraud.
• C. Internal auditors should report all fraud cases to law enforcement agents, in accordance with the Code of Ethics.
• D. Internal auditors are responsible for ensuring that fraud does not occur.

Answer: B

NEW QUESTION 16
If appropriate safeguards exist, which of the following is considered a legitimate internal audit role within risk management at an organization?

• A. Imposing risk management processes.
• B. Providing consolidated reporting on risks.
• C. Taking accountability for risk management.
• D. Making decisions on risk responses.

Answer: B

NEW QUESTION 17
What should the internal auditor's role be in assessing the organization's ethical climate?

• A. Perform ongoing surveys of the employees, customers, and partners of the organization to assess the organization's ethical climat
• B. ^Evaluate the effectiveness of the organization's strategies and
• C. processes for achieving the desired level of legal and ethical compliance.
• D. Maintain a whistleblower hotline to identify inappropriate or illegal activity within the organization.
• E. Perform background checks of potential new employees before they are hired by the organization.

Answer: B

NEW QUESTION 18
An internal auditor in a small broadcasting organization was assigned to review the revenue collection process. The auditor discovered that some checks from three customers were never recorded in the organization's financial records. Which of the following documents would be the least useful for the auditor to verify the finding?

• A. Bank statements.
• B. Customer confirmation letters.
• C. Copies of sales invoices.
• D. Copies of deposit slips.

Answer: D

NEW QUESTION 19
Which of the following is most likely to be considered a control weakness?

• A. Vendor invoice payment requests are accompanied by a purchase order and receiving report.
• B. Purchase orders are typed by the purchasing department using prenumbered forms.
• C. Buyers promptly update the official vendor listing as new supplier sources become known.
• D. Department managers initiate purchase requests that must be approved by the plant superintendent.

Answer: C

NEW QUESTION 20
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