An organization has a mature control environment but limited internal audit resources. Given this scenario, on which of the following should the internal auditors focus their testing?
A. Detective compensating controls.
B. Preventive compensating controls.
C. Detective key controls.
D. Preventive key controls.
To which of the following aspects should the chief audit executive give the most consideration while communicating an identified unacceptable risk to management?
A. The organization's attitude to hierarchy.
B. The organization's whistleblowing strategy.
C. The organization's ongoing risk monitoring process.
D. The organization's risk management policy.
An organization buys crude oil on the open market and refines it into a high-quality gasoline. The price of crude oil is extremely volatile. Which of the following is the most appropriate risk management technique to protect the organization against these price fluctuations?
A. Enter into long-term gasoline purchase agreements with end customers.
B. Trade crude oil derivatives at financial markets in order to benefit from price fluctuations
C. Purchase crude oil-related derivatives such as futures or options.
D. Stock as much raw materials as possible and consider investing into additional facilities.
The engagement supervisor would like to change the audit program's scope prior to beginning fieldwork. According to IIA guidance, before any change is implemented, what is the most important action that should be undertaken?
A. Document in the engagement workpapers the rationale for changing the scope.
B. Confirm that the scope change would align to the organization's objectives and goals.
C. Confirm that the internal audit activity continues to have the necessary knowledge and skills.
D. Seek approval from the chief audit executive for the proposed scope change.
Which of the following procedures would provide the most reliable evidence for an internal auditor testing whether defective products are effectively being identified and removed during processing before shipping to customers?
A. Reviewing quality department survey results, which show 96% of employees believe all defective products are removed prior to shipping.
B. Physically inspecting a sample of completed processing cycles for defective products prior to shipment.
C. Observing employees while they inspect products for defects.
D. Reviewing a quality report provided by management that shows 13 products were identified and removed during the most recent processing cycle.
Which of the following situations is most critical for the chief audit executive to report to the board?
A. The chief audit executive disagreed with the business unit manager's initial decision to accept a particular risk. Management ultimately agreed to address the risk only after discussing the issue with senior management.
B. A staff internal auditor had difficulties completing a portion of the audit because management of the area under review was unwilling to cooperate and provide information timely.
C. The internal audit activity was restructured, which resulted in a significant change in responsibilities among audit managers and supervisors for some audits.
D. The resignation of an internal audit manager during the year caused the chief audit executive to defer a number of audit engagements to the following year.
Which of the following is a primary reason for an internal auditor to use a risk and control questionnaire when auditing financial processes?
A. To gain an understanding of the control environment.
B. To collect as much financial data as possible before engagement fieldwork begins.
C. To test the effectiveness of financial controls in an efficient and relatively inexpensive way.
D. To facilitate the quantification of financial data obtained.
According to IIA guidance, which of the following statements regarding audit workpapers is true?
A. Audit reports should include the workpapers as a reference for the audit conclusions.
B. The internal auditor's workpapers are the primary reference for reported control deficiencies.
C. Ad-hoc communications with management of the area under review should be excluded from the workpapers.
D. Both draft and final versions of workpapers should be saved at the end of the engagement.
A chief audit executive (CAE) is trying to balance the internal audit activity's needs for technical audit skills, budget efficiency, and staff development opportunities. Which of the following would best assist the CAE in achieving this balance?
A. Strategic sourcing.
B. Loan staff arrangement.
C. Flat organizational structure.
D. Hierarchical organizational structure.
Which of the following is the most important determinant of the objectives and scope of assurance engagements?
A. The organizational chart, business objectives, and policies and procedures of the area to be reviewed.
B. The most recent risk assessment conducted by management of the area to be reviewed.
C. The requests of operational and senior management throughout the organization.
D. The preliminary risk assessment performed by internal auditors planning the engagement.
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