An internal auditor is discussing an audit problem with an engagement client. While listening to the
client, the internal auditor should:

A.

Prepare a response to the client.

B.

Take mental notes on the speaker's nonverbal communication, as it is more important than
what is being said.

C.

Make sure that all details, as well as the main ideas of the client, are remembered.

D.

Integrate the incoming information from the client with information that is already known.

An auditor is using an internal control questionnaire as part of a preliminary survey. Which of the
following is the best reason for the auditor to interview management regarding the questionnaire
responses?

A.

Interviews provide the opportunity to insert questions to probe promising areas.

B.

Interviews are the most efficient way to upgrade the information to the level of objective
evidence.

C.

 Interviewing is the least costly audit technique when a large amount of information is involved.

D.

Interviewing is the only audit procedure which does not require confirmation of the information
that is obtained.

Many questionnaires are made up of a series of different questions that use the same response
categories (for example: strongly agree, agree, neither, disagree, strongly disagree). Some
designs will have different groups of respondents answer alternate versions of the questionnaire
that present the questions in different orders and reverse the orientation of the endpoints of the
scale (for example: agree on the right and disagree on the left). The purpose of such questionnaire
variations is to:

A.

Eliminate intentional misrepresentations.

B.

Reduce the effects of pattern response tendencies.

C.

Test whether respondents are reading the questionnaire.

D.

Make it possible to get information about more than one population parameter using the same
questions.

An auditor used a questionnaire during an interview to gather information about the nature of
credit sales processing. The questionnaire did not cover some pertinent information offered by the
person being interviewed, and the auditor did not document the potential problems for further
investigation.
The primary deficiency with the above process is that:

A.

The auditor failed to consider the importance of the information offered.

B.

A questionnaire was used in a situation where a structured interview should have been used.

C.

Using a questionnaire precludes the auditor from documenting other information.

D.

.The engagement program was incomplete.

The use of standard operating procedure questionnaires in audit fieldwork can be beneficial
because.

A.

These questionnaires can both identify discrepancies and educate clients.

B.

Standard operating procedures are essential to the effectiveness and efficiency of operations.

C.

These questionnaires are more comprehensive than are other types of techniques for gathering
data during fieldwork.

D.

These questionnaires do not normally require prior clearance with management of the audited
area.

Checklists used to assess audit risk have been criticized for all of the following reasons except:

A.

Providing a false sense of security that all relevant factors are addressed.

B.

Inappropriately implying equal weight to each item on the checklist.

C.

Decreasing the uniformity of data acquisition.

D.

Being incapable of translating the experience or sound reasoning intended to be captured by
each item on the checklist.

A limitation of using ratio analysis in an audit engagement is that it:

A.

Often uses financial information provided by management which has not been reviewed for
reliability and validity.

B.

Is an expensive method of testing.

C.

Requires computer software in order to develop meaningful interpretations of data.

D.

 Is useful only when comparisons can be made across other industries.

Which of the following would cause a company's accounts receivable turnover ratio to decrease
steadily over a three-year period?

A.

An increase in the discount offered for early payment.

B.

A more liberal credit policy.

C.

Invoices provided on a weekly rather than a monthly basis.

D.

Increased cash sales

Which of the following would be the best audit procedure to use to determine if a division's
unusually high sales and gross margin for November and December were the result of fraudulently
recorded sales?

A.

Trace a sample of shipping documents to related sales invoices to verify proper billing.

B.

Confirm accounts receivable balances with customers.

C.

Compare sales and gross margin totals with those of the previous ten months and the first
month of the following year.

D.

Use regression analysis techniques to estimate the sales and cost of goods sold for November
and December.

Which of the following factors could interfere with effective problem solving by an internal auditor?
I. Reacting to previous experiences with clients.
II. Focusing only on the most likely cause.
III. Correcting the symptoms of problems.

A.

 I only

B.

III only

C.

I and II only

D.

 I, II, and III

A company owns a machine that will produce 100 light switches in four hours. Due to increased
demand, a second machine capable of producing 100 light switches in three hours has been
added.
Approximately how many hours will it take to produce 100 light switches using both machines
working together?

A.

7.0

B.

3.5

C.

 1.7

D.

0.58

A retail sales company has discontinued a product that normally sold for $100. During the first
month of a sale of the product, a 20 percent discount was given. Later that sale price was reduced
by an additional 40 percent. What was the overall discount from the original selling price?

A.

60 percent.

B.

52 percent.

C.

48 percent.

D.

30 percent