To ensure that due professional care has been taken during an audit engagement,an
internal auditor should always:

A.

Ensure that all financial information related to the engagement is included in the audit
plan and examined for irregularities.

B.

Document all audit tests completely.

C.

Consider the possibility of noncompliance or irregularities at all times during an engagement.

D.

Notify the audit committee of any noncompliance or irregularity discovered during an engagement.

Internal auditors who are concerned with potential risks due to the mishandling of records
or transactions should take into consideration:

A.

The type and nature of the activities to be examined.

B.

Whether employees in key positions of trust are bonded.

C.

The history of losses suffered by the company.

D.

The results of prior risk assessments.

Reportable audit findings mustbe:
I.Documented by facts.
II.Supported by relevant evidence.
III.Agreed to by management of the audited area.
IV.Convincing enough to compel corrective action.

A.

I and IVonly

B.

II and IIIonly

C.

I,II,and IVonly

D.

I,II,III,and IV.

What role,if any,should the internal audit activity have in the process of following up on
observations and recommendations made by the external auditors?

A.

The internal audit activity should have no role in this process in order to ensure independence.

B.

The internal audit activity should become involved only if the chief audit executive has
sufficient evidence that the follow-up is not occurring.

C.

The internal audit activity should review the adequacy and effectiveness of management's follow-up actions.

D.

The internal audit activity should become involved only if specifically requested by management or the board of directors.

Using the internal audit department to coordinate regulatory examiners' efforts is beneficial
to the organization because internal auditors can:

A.

Influence regulatory interpretation of law to better match corporate practice.

B.

Recommend changes to the scope of the regulatory examiners' review.

C.

Perform fieldwork for the regulatory examiners and thus shorten the regulatory examiners' review.

D.

Supply evidence of adequate compliance testing through internal audit workpapers and reports.

Which of the following best contributes to the effectiveness of the internal audit activity in
an organization?

A.

Appropriate terms of internal audit scope and responsibility in the charter.

B.

Appropriate compliance coverage in the annual audit plan.

C.

Regular review of the audit charter by management.

D.

Assurance of internal audit objectivity by the board.

Which of the following is the primary concern of an internal auditor in a comprehensive
audit of an organization?

A.

Accuracy of reports on the source and use of funds.

B.

Extent of achievement of the organization's mission.

C.

Confirmation of compliance with policies and procedures.

D.

Appropriateness of procedures related to the budgeting process.

Which of the following actions by a chief audit executive is most likely to prevent
exaggerated sales reports by division management?
I.Hire a new internal auditor who has fraud investigation credentials.
II.Assist the controller in developing and monitoring a series of business process indicators which are historically correlated with,but independent of,sales.
III.Announce a series of internal audit engagements focusing on compliance with corporate
sales-reporting policies.
IV.Ask the president and the board to issue a statement of corporate policy stressing the
importance of accurate management reporting and the negative consequences of
intentional misreporting.

A.

I and IIonly

B.

II and IIIonly

C.

III and IVonly

D.

I,II,III,and IV.

Risk within an internal audit engagement is defined as the:

A.

Probability that a balance or class of transactions and related assertions contain
misstatements that could be material to the financial statements.

B.

Uncertainty of an event occurring that could have an impact on the achievement of
objectives.

C.

Failure to adhere to organizational policies,plans,and procedures,or the failure to comply
with relevant laws and regulations.

D.

Failure to accomplish established objectives and goals for operations or programs.

Which of the following situations allows for the most objectivity on the part of an internal auditor?

A.

Assessing testing procedures in a new computer system.

B.

Performing a risk assessment of a new financial instrument.

C.

Drawing conclusions from a sample of financial transactions.

D.

Comparing current environmental activities against legislation.

Due to urgent requests from management,a busy internal audit activity finds that it can no
longer meet all of its commitments contained in the annual audit plan. The best course of
action for the chief audit executive to take would be to:

A.

Continue with the plan and seek opportunities to adjust priorities and reallocate resources.

B.

Advise senior management and request that they reconsider these additional requests using more rigorous risk assessment and prioritization factors.

C.

Advise the board and senior management and request a reassessment of the plan.

D.

Advise the board immediately and seek their support for additional resources to meet the needs of the plan.

Which of the following is not an appropriate role of the internal audit activity in governance
activities?

A.

Support the board in enterprise-wide risk assessment.

B.

Ensure the timely implementation of audit recommendations.

C.

Monitor compliance with the organization's ethics policies.

D.

Discuss areas of significant risk.