Which of the following audit activities is within the scope of assurance activities as stated in the International Professional Practices Framework?
A. Review a make-or-buy decision and report a recommendation to management for approval.
B. Participate in negotiations for a corporate acquisition.
C. Assess financing alternatives for a new generator.
D. Perform an evaluation of management's planning process.
In order to ensure that the internal auditors have the objectivity required by the Standards, the chief audit executive should:
A. Demonstrate willingness to include in engagement final communications all matters believed to be important.
B. Require all auditors to sign statements attesting to their independent mental attitudes and honest belief in their work product.
C. Carefully assign personnel to individual audit engagements and require auditors to disclose all conflicts of interest.
D. Appraise each auditor's performance on each audit assignment.
An organization has developed a large database that tracks employees, employee benefits, payroll deductions, job classifications, and other similar information. In order to test whether data currently within the automated system are correct, an auditor should:
A. Use test data and determine whether all the data entered are captured correctly in the updated database.
B. Select a sample of data to be entered for a few days and trace the data to the updated database to determine the correctness of the updates.
C. Use generalized audit software to provide a printout of all employees with invalid job descriptions. Investigate the causes of the problems.
D. Use generalized audit software to select a sample of employees from the database. Verify the data fields.
Which of the following is not a benefit of using information technology in solving audit problems?
A. It helps reduce audit risk.
B. It improves the timeliness of the audit engagement.
C. It increases audit opportunities.
D. It improves the auditor's judgment.
An internal auditor plans to use an analytical review to verify the correctness of various operating expenses in a division. The use of an analytical review as a verification technique would not be a preferred approach if.
A. The auditor notes strong indicators of a specific fraud involving this account.
B. The company has relatively stable operations which have not changed much over the past year.
C. The auditor would like to identify large, unusual, or non-recurring transactions during the year.
D. The operating expenses vary in relation to other operating expenses, but not in relation to revenue.
Which of the following best describes how the increased use of computerization may impact an auditor's assessment of the risk of fraud?
A. Access to assets may be available to information systems personnel as well as to computer users.
B. Computer controls are generally less effective than human review.
C. Overrides of key controls may require less collaboration.
D. Audit trails are less effective.
A charitable organization provides substantial grants for important medical research. Assuming marginal controls are in place, which of the following possible frauds or misuses of organization assets should be considered the area of greatest risk?
A. Senior executives are using company travel and entertainment funds for activities that might be considered questionable.
B. Purchases of office supplies are made from fictitious vendors.
C. Grants are made to organizations associated with senior executives.
D. A payroll clerk has added a fictitious employee.
If earnings on financial statements for internal use only have been manipulated in the past, an internal auditor is likely to focus on which of the following?
A. The proper accrual of payables at the end of the interim period.
B. The timing of revenue recognition and the valuation of inventories.
C. Whether accounting estimates are reasonable given past actual results.
D. Whether there have been changes in accounting principles that materially affect the financial statements.
Which of the following procedures would provide the best evidence of the effectiveness of a credit-granting function?
A. Observe the process.
B. Review the trend in receivables write-offs.
C. Ask the credit manager about the effectiveness of the function.
D. Check for evidence of credit approval on a sample of customer orders.
Fraud is most frequently detected by:
A. Following up on tips from employees or citizens.
B. Following up on analytical review of high-risk areas.
C. Performing periodic reconciliations over cash and other assets.
D. Performing unannounced audits or reviews of programs or departments.
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