IIA-Certified Internal Auditor - Part 2, Conducting the Internal Audit Engagement Set 5

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IIA-Certified Internal Auditor - Part 2, Conducting the Internal Audit Engagement Set 5

Confirmation would be most effective in addressing the existence assertion for:

The addition of a milling machine to a machine shop. ✘ Sales of merchandise during the regular course of business. ✘ Inventory held on consignment. ✘ The granting of a patent for a special process developed by the organization. ✔

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Answer & Solution

Answer: Option B

Solution:

It provides fallback for IE8.

In a payroll audit, a staff auditor suspects that signatures on some of the documents being sampled for examination are not authentic. What action should the auditor take before proceeding with the examination?

Suggest to the payroll manager that the suspicious documents should be sent to the organization's
security department for forensic review. ✘ Keep the suspicious documents in the workpaper file until the end of the engagement, and then discussthe suspicions with the payroll manager. ✘ Discuss the suspicious documents with payroll staff to seek their views on the authenticity of thesignatures. ✘ Review the suspicious documents with the chief audit executive and seek advice concerning furtherexamination. ✔

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Answer & Solution

Answer: Option B

Solution:

It provides fallback for IE8.

In evaluating the validity of different types of audit evidence, which of the following conclusions is not correct?

Recomputation, though highly valid, is limited in usefulness due to its limited scope. ✘ The validity of documentary evidence is independent of the effectiveness of the control system in whichit was created. ✘ Internally created documentary evidence is considered less valid than externally created documentaryevidence. ✘ The validity of confirmations varies directly with the independence of the party receiving theconfirmation. ✔

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Answer & Solution

Answer: Option B

Solution:

It provides fallback for IE8.

Which of the following types of sampling techniques should an internal auditor use when testing the effectiveness of internal controls?

Mean-per-unit sampling. ✘ Attributes sampling. ✘ Variables sampling. ✘ Dollar-unit sampling. ✔

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Answer & Solution

Answer: Option B

Solution:

It provides fallback for IE8.

What type of analysis is performed when an auditor tests for unusual variations in information by comparing the number of employees working at a factory site with the direct cost of production each month over a period of one year?

Trend analysis. ✘ Ratio analysis. ✘ Regression analysis. ✘ Horizontal analysis. ✔

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Answer & Solution

Answer: Option B

Solution:

It provides fallback for IE8.

Which of the following data sources would provide the least valid data for an audit of a retail store's customer service?

A graph that compares staffing levels for selected times with store traffic (number of customers) over
the same time period. ✘ A random survey of customer satisfaction given to customers as they leave the store. ✘ Interviews of randomly selected service personnel regarding the quality of service that they provide. ✘ A graph of customer service training across stores, comparing training with overall levels of servicesatisfaction. ✔

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Answer & Solution

Answer: Option B

Solution:

It provides fallback for IE8.

Which of the following examples of audit evidence is the most persuasive?

Real estate deeds, which were properly recorded with a government agency. ✘ Canceled checks written by the treasurer and returned from a bank. ✘ Time cards for employees, which are stored by a manager. ✘ Vendor invoices filed by the accounting department. ✔

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Answer & Solution

Answer: Option B

Solution:

It provides fallback for IE8.

In reviewing the appropriateness of the minimum quantity level of inventory established by a department, an auditor would be least likely to consider:

Stockout costs, including lost customers. ✘ Seasonal variations in forecasting inventory demand. ✘ Optimal order sizes determined by an economic order quantity model. ✘ The potential for obsolescence of inventory items. ✔

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Answer & Solution

Answer: Option B

Solution:

It provides fallback for IE8.

During an audit, an employee, who does not want to be identified, offers to provide information that would be damaging to the organization and may concern illegal activities. Which of the following actions by the auditor would not be consistent with the IIA Code of Ethics and Standards?

Promising to maintain the employee's anonymity and listening to the information. ✘ Suggesting that the employee consider talking to legal counsel. ✘ Informing the employee that an attempt will be made to keep the source of the information confidentialwhile looking into the matter further. ✘ Informing the employee of other methods of communicating this type of information. ✔

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Answer & Solution

Answer: Option B

Solution:

It provides fallback for IE8.

10.

Which of the following would have the least impact (either positive or negative) on an assessment of a department's control environment?

The department managed long-term investments, including investment in derivatives and other financial
instruments, to maximize return. ✘ The department manager sets a tone of honesty and integrity in all business dealings and this tone isemulated by department personnel. ✘ Many department functions were duplicated or verified by other department employees as part of thedepartment's normal procedures. ✘ Audit tests designed to verify compliance with control procedures detected a general failure to followstandard procedures for transaction authorization. ✔

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Answer & Solution

Answer: Option B

Solution:

It provides fallback for IE8.

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IIA-Certified Internal Auditor - Part 2, Conducting the Internal Audit Engagement Set 5

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