Why is the concept of residual risk important?

A.

Because residual risk is difficult to measure.

B.

Because residual risk is all of the risk that remains after controls are established.

C.

Because the cost-benefit analysis supporting control design is part of the measure of
residual risk.

D.

Because the risk that remains after control design and implementation needs to be
acceptable to senior management.

A chief audit executive (CAE) of a major retailer has engaged an independent firm of
information security specialists to perform specialized internal audit activities. The CAE can
rely on the specialists' work only if it is:

A.

Performed in accordance with the terms of the contract.

B.

Carried out in accordance with the Standards.

C.

Performed under the supervision of the information technology department.

D.

Carried out using standard review procedures for retailers.

Which of the following statements is true about visual observation during an audit
engagement?
1.Visual observations should not be documented as the facts have not been substantiated.
2.Complex conditions observed should be verified prior to communicating observations to
management.
3.Visual observations can be used to detect ineffective controls,idle resources,and safety
hazards.
4.Visual observation can be used during both preliminary survey and fieldwork stages of
the audit engagement.

A.

1 and 2 only

B.

3 and 4 only

C.

1,2,and 4 only

D.

2,3,and 4 only

During a routine audit of a customer service hotline,an internal auditor noticed that an
unusually high number of customer complaints pertained to payments not being applied to
the customers' accounts. Which of the following would most likely be the reason for the
high volume of complaints?

A.

An ineffective customer service department.

B.

Poor controls in the invoice approval processes.

C.

Check tampering by an employee.

D.

Submission of fraudulent expense reports.

When comparing an organization's current performance to that of the prior year,an internal
auditor found that:
Total labor costs had increased.
More overtime costs had been incurred.
The total number of workers had increased.
Net income was 10 percent lower.
Based solely on this information,which of the following is a valid conclusion?

A.

Net income per worker decreased.

B.

Wage rates increased.

C.

Worker efficiency decreased.

D.

 Total labor hours increased.

Which of the following is least likely to enhance the independence of an internal audit activity?

A.

The existence of a formal written charter for the internal audit activity.

B.

Submission of an annual internal audit work plan to the audit committee.

C.

A direct reporting relationship to the audit committee.

D.

Adherence to the organization's position classification structure.

Which of the following is a common error made in designing multiple-choice questions in a
survey questionnaire?

A.

Unipolar rather than bipolar labels are used for the response categories.

B.

 The alternative response categories for the questions are not mutually exclusive.

C.

Likert scaling is used instead of semantic differential scaling.

D.

The question itself uses terms that are very familiar to the respondent.

During an audit of a major contract,an internal auditor finds that actual hours and dollars
billed are consistently at or near budgeted amounts. This condition is a red flag for which of
the following procurement fraud schemes?

A.

Defective pricing.

B.

Cost mischarging.

C.

Fictitious vendor.

D.

 Bid rotation.

In which of the following situations would fishbone diagrams be most useful?

A.

 The problem is complicated and the root cause is unknown.
 

B.

Team members cannot effectively communicate with each other.

C.

 The team is too small for brainstorming to be effective.

D.

The team consists of experts who can resolve problems without much difficulty.

Which of the following data collection strategies systematically tests the effects of various
factors on an outcome?

A.

Content analysis.

B.

 Sampling.

C.

Evaluation synthesis.
 

D.

Modeling.

Which of the following is not an advantage of face-to-face interviews over electronic
surveys?

A.

The response rate is typically higher.

B.

Interviewers can increase a respondent's comprehension of questions.

C.

Survey designers can use a wider variety of question types.

D.

They are less expensive to distribute and compile data.

Which of the following factors is not likely to affect the level of inherent risk associated with
an application system?

A.

The system is strategic.

B.

Controls over the system appear reliable.

C.

The system is not a critical operating system.

D.

The system uses complex technology.