Within the internal audit process,which of the following is not a significant advantage of
employing a control model?

A.

It provides guidance on identifying control deficiencies for each internal audit engagement.

B.

It recognizes the need to evaluate both hard and soft controls.

C.

It assists internal auditors in assessing the achievement of management's objectives.

D.

It validates the findings and recommendations of the internal audit.

Company A has a formal comprehensive corporate code of ethics while company B does
not. Which of the following statements regarding the existence of the code of ethics in
company A can be logically inferred?
1.Company A exhibits a higher standard of ethical behavior than does company B.
2.Company A has established objective criteria by which an employee's actions can be
evaluated.
3.The absence of a formal corporate code of ethics in company B would prevent a
successful audit of ethical behavior in that company.

A.

2only

B.

3only

C.

1 and 2only

D.

2 and 3only

Which of the following is the primary advantage of using a computer assisted audit
technique (CAAT) to provide a higher level of assurance?

A.

CAATs can select an appropriate sample size for testing and thus provide higher level of
assurance.

B.

CAATs are more objective than the traditional methods in interpreting the results.

C.

CAATs can examine the whole of population of transactions,rather than a sample,in
order to identify exceptions and trends.

D.

CAATs can process the results faster and thus give a higher level of assurance.

Which of the following items of evidence is most valid to support a finding that a public
utility's repair crews are sometimes required to work under unsafe conditions?

A.

Videotapes of repair crews working in a situation that is unsafe.

B.

Audio taped testimonials from repair crew members who were required to work under unsafe conditions.

C.

Reports showing increases in the number of days of sick leave for individuals on repair crews.

D.

Written and signed descriptions from repair crew members of the unsafe conditions that
they have had to endure.

Which of the following internal control weaknesses would an internal auditor most likely
detect while reviewing a flowchart that depicts the purchasing function of an organization?

A.

Purchasing policies have not been updated.

B.

The organization is not taking advantage of quantity discounts available from its suppliers.

C.

Payments for goods received have not been authorized at the appropriate level.

D.

Payments to suppliers are made before goods are received.

The chief audit executive is revising policies relating to independence and objectivity of the
internal audit activity. Which of the following would be a part of the revised policies
document?

A.

Any auditor that received high-value gifts from an audit client must report it to their
supervisor.

B.

Any auditor that received gifts of low-value promotional items from an audit client must
report it to their supervisor.

C.

An auditor does not need to complete an annual conflict of interest form unless the
auditor's independence status has changed.

D.

An auditor may provide consulting services relating to operations for which they had
previous responsibilities.

An internal auditor is designing a sampling plan to test the accuracy of daily production
reports over the past three years. All of the reports contain the same information except
that Friday reports also contain weekly totals and are prepared by managers rather than by
supervisors. Production normally peaks near the end of a month. If the auditor wants to
select two reports per month using an interval sampling plan,which of the following
techniques reduces the likelihood of bias in the sample?

A.

 Estimating the error rate in the population.

B.

Using multiple random starts.

C.

Increasing the confidence level.

D.

Increasing the precision.

Which of the following are appropriate ways to obtain continuous professional education?
1.Instructing at a local IIA training event.
2.Attending internal audit conferences and seminars.
3.Practicing specialized audit and consulting work.
4.Participating in research projects in internal auditing.

A.

1 and 3 only

B.

1 and 2 only

C.

3 and 4 only

D.

1,2,and 4 only

Which of the following is characteristic of embezzlement?

A.

Favors from a supplier that is attempting to gain advantage when selling its products.

B.

Unlawful conversion of assets that are in the possession of an employee.

C.

Misrepresentation of material facts in order to mislead others to part with something of
value.

D.

Stealing of material of value by unknown persons from outside the organization.

During a review of a division's operations,an internal auditor notes that sales and customer
base are unchanged,while inventory and gross margin have increased significantly. Which
of the following audit procedures would be most relevant in substantiating management's
assertion that the gross margin increase is due to increased efficiency in manufacturing
operations?

A.

Obtain a physical count of inventory.

B.

For a sample of products,compare costs-per-unit this year to those of last year,test cost
build-ups,and analyze standard cost variances.

C.

Take a physical inventory of equipment to determine if there were significant changes.

D.

Select a sample of finished goods inventory and trace raw materials cost back to
purchase prices in order to determine the accuracy of the recorded raw materials price.

A major corporation is considering significant organizational changes. Which of the
following groups would not be responsible for implementing these changes?

A.

Employees.

B.

Senior management.

C.

Common stockholders.

D.

Outside consultants.

The results of an internal control questionnaire revealed that all investment activity
exceeding $10,000 must be approved by the assistant treasurer. A sample of these
transactions with a five-percent acceptable error rate found that 98 of the 100 items tested
included the assistant treasurer's approval. Based on this data,the auditor should:

A.

Confirm all investment activity with the firm's broker since errors in approval had
occurred.

B.

Decide not to perform further testing of investment authorizations.

C.

Contact the corporate finance department to verify all of the investments held.

D.

Perform an analytical review of investment transactions in comparison with prior years to
identify significant fluctuations.