NEW QUESTION 1
A new director was hired to lead the internal audit activity at a small start-up company. Which of the following assignments would impair the director's independence?

• A. Preparing the financial statements for the company's defined contribution plan.
• B. Performing a pre-implementation review of the company's payroll application.
• C. Providing the COBIT framework as a possible IT management tool.
• D. Reviewing the company's policy for foreign currency translation adjustments for compliance with accounting standards.

Answer: A

NEW QUESTION 2
Which of the following statements describes impairment to the internal auditor's objectivity?

• A. An internal auditor reviews a purchasing agent's contract drafts prior to their execution.
• B. An internal auditor reduces the scope of an audit engagement due to budget restrictions.
• C. An internal auditor receives a promotional gift that is available to the organization's employees.
• D. An internal auditor performs an assessment of the operations for which he was recently responsible.

Answer: D

NEW QUESTION 3
A furniture manufacturer has installed a new fire sprinkler system at its central warehouse and canceled the existing fire insurance policy on that property. What change of risk response strategy does this course of action most likely reflect?

• A. From sharing to reduction.
• B. From acceptance to reduction.
• C. From sharing to avoidance.
• D. From acceptance to avoidance.

Answer: A

NEW QUESTION 4
Which of the following is a common type of payroll fraud?

• A. Unauthorized overtime.
• B. Fictitious employees.
• C. Unearned bonuses or commissions.
• D. Skimming.

Answer: B

NEW QUESTION 5
What is the primary benefit to the internal audit activity for undertaking an internal quality assessment?

• A. To help the internal audit activity complete its annual assurance plan.
• B. To identify inefficiencies within the internal audit team.
• C. To help improve the overall quality of the internal audit activity's work.
• D. To identify key risks and areas of concern within the organization.

Answer: C

NEW QUESTION 6
According to IIA guidance, which of the following must internal auditors consider to conform with the requirements for due professional care during a consulting engagement?
* 1. The cost of the engagement, as it pertains to audit time and expenses in relation to the potential benefits.
* 2. The needs and expectation of clients, including the nature, timing, and communication of engagement results.
* 3. The application of technology-based audit and other data analysis techniques, where appropriate.
* 4. The relative complexity and extent of work needed to achieve the engagement's objectives.

• A. 1, 2, and 3
• B. 1, 2, and 4
• C. 1, 3, and 4
• D. 2, 3, and 4

Answer: B

NEW QUESTION 7
Which of the following statements is true about The IIA Global Internal Audit Competency Framework?

• A. The core competencies outlined in the framework are not expected of a person undertaking an entry-level position as an internal auditor.
• B. The framework is designed to be used primarily by chief audit executives that are developing indicators to measure the performance of the internal audit activity for which they are responsible.
• C. The framework lists the core competencies internal auditors should possess before attempting to attain The IIA's Certified Internal Auditor certification.
• D. The framework describes competencies needed for individual internal auditors, but not those necessary at the chief audit executive level.

Answer: B

NEW QUESTION 8
According to IIA guidance, which of the following statements about working papers is false?

• A. They assist in the implementation of recommendations.
• B. They provide support for communication to third parties.
• C. They demonstrate compliance with auditing standards.
• D. They contribute to development of the internal audit staff.

Answer: A

NEW QUESTION 9
Which of the following is a requirement for an assurance engagement that may not be for a consulting engagement?

• A. The internal audit activity has to ensure team members' objectivity is not impaired.
• B. Auditors cannot participate in an assurance engagement of a function for which they previously performed a consulting engagement.
• C. The scope and objective of the engagement is agreed upon based on the engagement client's needs.
• D. The internal audit activity must ensure management actions have been implemented effectively or risk accepted.

Answer: B

NEW QUESTION 10
According to IIA guidance, when preparing the charter for the internal audit activity, the chief audit executive (CAE), board, and senior management should agree on which of the following?
* 1. The standards to be used by the internal audit activity.
* 2. The internal audit activity's code of ethics.
* 3. The CAE's reporting line.
* 4. The internal audit activity's responsibilities.

• A. 4 only.
• B. 1 and 2 only.
• C. 3 and 4.
• D. 1,2, and 3.

Answer: C

NEW QUESTION 11
Which of the following is most likely to enhance an internal auditor's objectivity?

• A. An auditor is appropriately able to communicate results.
• B. An auditor performs his work free from interference.
• C. An auditor is unrestricted in determination of scope.
• D. An auditor avoids conflicts of interest.

Answer: D

NEW QUESTION 12
An internal auditor is using a spreadsheet application to review a cash flow forecast prepared by management. Which of the following correctly identifies the type of evidence this information represents?

• A. Competent, corroborative evidence of future working capital requirements.
• B. Sufficient, analytical evidence of the cash flow position at a given point of time in the future.
• C. Competent, documentary evidence of future cash flow changes within the organization.
• D. Sufficient, circumstantial evidence of the future solvency of the organization.

Answer: C

NEW QUESTION 13
Reviewing prior audit reports and supporting workpapers before an engagement starts enables an internal auditor to do which of the following?
* 1. To understand better the activity and processes that will be audited.
* 2. To identify the audit procedures that will be used during the engagement.
* 3. To ensure that matters of greatest vulnerability will be addressed.
* 4. To use the information obtained as evidence in the current engagement.

• A. 4 only
• B. 1 and 3 only
• C. 1 and 4 only
• D. 2, 3, and 4 only

Answer: B

NEW QUESTION 14
According to COSO, which of the following is not considered one of the components of an organization's internal environment?

• A. Authority and responsibility to resolve issues.
• B. Framework to plan, execute and monitor activities.
• C. Integrated responses to multiple risks.
• D. Knowledge and skills needed to perform activities.

Answer: C

NEW QUESTION 15
Which of the following statements accurately describes an internal auditor's responsibility with regard to due professional care?

• A. An internal auditor should express an opinion only when consensus with top management has been achieved.
• B. An internal auditor's opinion should be based on experience and free of all bias.
• C. An internal auditor's opinion should be based on factual evidence.
• D. An internal auditor's opinion should be limited to the effectiveness of internal controls.

Answer: C

NEW QUESTION 16
Which of the following actions best demonstrates that an internal auditor is exercising due professional care?

• A. The auditor performs thorough reviews and provides absolute assurance of regulatory compliance.
• B. The auditor is alert to the possibility of fraud and activities where irregularities are most likely to occur.
• C. The auditor recommends improvements for all of the organization's procedures and practices.
• D. The auditor is cognizant of reducing travel expenses by combining a personal vacation with a business trip.

Answer: B

NEW QUESTION 17
According to IIA guidance, which of the following external groups is most likely to represent a liability risk, based on activities associated with the organization's corporate social responsibility program?

• A. Consumers.
• B. Activists.
• C. Suppliers.
• D. Investors.

Answer: B

NEW QUESTION 18
The manager for an organization's accounts payable department resigned her post in that capacity. Three months later, she was recruited to the internal audit activity and has been working with the audit team for the last eight months. Which of the following assignments would the newly hired internal auditor be able to execute without any impairments to independence or objectivity?

• A. An operations audit of the accounts payable department.
• B. A consulting engagement related to a new accounts payable optimization initiative.
• C. A review of the employees' sports club finances, which are overseen by the chief audit executive.
• D. An assurance review for a sales program on which she previously provided consultation.

Answer: C

NEW QUESTION 19
According to IIA guidance, which of the following practices by the chief audit executive (CAE) best enhances the organizational independence of the internal audit activity?

• A. CAE reviews and approves the annual audit plan.
• B. CAE meets privately with The CEO at least annually.
• C. CAE meets privately with The board at least annually.
• D. CAE reports to the board regarding audit staff performance evaluation and compensation.

Answer: D

NEW QUESTION 20
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