ACCT 4631 - Internal Auditing: CIA Quiz Topics 12, 13, 14
Several levels of management are interested in the results of an engagement performed in the marketing department. What is the best method of communicating the results of the engagement?
A. Write detailed communications for each level of management.
B. Di
Answer C is correct.
The CAE distributes the final engagement communication to the management of the audited
activity and to those members of the organization who can ensure engagement results are given due consideration and take corrective action or to e
During an interview with a data input clerk to discuss a computerized system used to track employee training requirements and compliance, an internal auditor identifies a potentially significant weakness in the system. The internal auditor should
A. Ask t
Answer C is correct.
Indirect questions may
allow the internal auditor to obtain some information without making the clerk feel accused. An interviewee who has been put at ease and does not feel threatened is more likely to be cooperative.
According to the International Professional Practices Framework, which of the following is part of the minimum requirements for an engagement final communication?
1. Background information.
2. Purpose of the engagement.
3. Engagement scope.
4. Results of
Answer D is correct.
Although the format and content of the final engagement communications may vary by organization or type of engagement, they are to contain, at a minimum, the purpose, scope, and results of the engagement (PA 2410-1, para. 1).
Which of the following is the best approach for obtaining feedback from engagement clients on the quality of internal audit work?
A. Distribute questionnaires to selected engagement clients shortly before
preparing the internal audit annual activity repor
Answer B is correct.
The client satisfaction survey should be provided to the client at the beginning of the engagement. This allows the client to gauge the internal audit activity's performance on specific measures during the engagement.
In the planning phase, the scope of an internal audit engagement is defined by the
A. Engagement work program.
B. Preliminary survey.
C. Engagement
objectives.
D. Scheduling and time estimates.
Answer C is correct.
The established scope must be sufficient to satisfy the objectives of the engagement (Perf. Std. 2220).
An internal auditor has just completed a survey to become familiar with the organization's payroll operations as part of an unplanned engagement. Which of the following most likely is performed next?
A. Conduct field work.
B. Write the engagement work pro
Answer B is correct.
The survey allows the internal auditor to become familiar with the engagement client and therefore provides input to the work program.
Avoiding unnecessary technical language is best associated with which quality of communication addressed in the Standards?
A. Accurate.
B. Concise.
C. Clear.
D. Complete.
Answer C is correct.
Communications must be accurate, objective, clear, concise, constructive, complete,
and timely (Perf. Std. 2420). Clear communications are easily understood and logical. Clarity can be improved by avoiding unnecessary technical langua
Internal auditors need to determine the extent to which management has established adequate control criteria. For this purpose, which of the following actions may be appropriate?
1. Determining whether objectives have been accomplished
2. Using management
Answer B is correct.
"Adequate criteria
are needed to evaluate controls. Internal auditors must ascertain the extent to which management has established adequate criteria to determine whether objectives and goals have been accomplished. If adequate, inter
Which of the following is not an objective of the exit meeting for an engagement performed by the internal auditors?
A. To resolve conflicts.
B. To identify concerns for future engagements.
C. To discuss the observations, conclusions, and
recommendations.
Answer B is correct.
The purpose of post-engagement meetings (exit meetings) is to help avoid misunderstandings or misinterpretations of fact by providing the opportunity for the engagement client to clarify specific items and express views of the observa
Data-gathering activities such as interviewing operating personnel, identifying standards to be used to evaluate performance, and assessing risks inherent in a department's
operations are typically performed in which phase of an audit engagement?
A. Preli
Answer A is correct.
Engagement planning should include performing, as appropriate, a survey to (1) become familiar with the activities, risks, and controls to identify areas for engagement emphasis and (2) invite client comments and suggestions from enga
Fact Pattern:
Paragraph 1: The production department has the newest production equipment available because
of a fire that required the replacement of all equipment.
Paragraph 2: The members of the production department have become completely comfortable w
Answer B is correct.
Condition is defined as the factual evidence that the internal auditor found in the course of the examination (the current state) (PA 2410-1, para. 7). Paragraph 3 describes the actual productivity of the firm.
The most appropriate use of an oral engagement communication is to
communicate
A. Conditions that demand immediate action.
B. Matters that are not material.
C. Complex matters to operating management when the possibility exists that misunderstanding would
Answer A is correct.
Interim reports are written or oral and are used to communicate information that requires immediate attention. Therefore, the most appropriate use of an oral engagement communication would be in an interim report to communicate condit
When reviewing engagement working papers, the primary responsibility of an engagement supervisor is to determine that
A. Working papers adequately support the engagement observations, conclusions, and recommendations.
B. Standard internal audit activity p
Answer A is correct.
All engagement working papers are reviewed to ensure they support engagement communications and necessary audit procedures are performed (PA 2340-1, para. 3).
Which
statement most accurately describes how criteria are established for use by internal auditors in determining whether goals and objectives have been accomplished?
A. Management is responsible for establishing the criteria.
B. The industry in which a
Answer A is correct.
Internal auditors must ascertain the extent to which management has established adequate criteria to determine whether objectives and goals have been accomplished (Impl. Std. 2210.A3). Thus, management is
always responsible for establ
When a final engagement communication contains a significant error, the Standards require the chief audit executive to
A. Communicate corrected information to all those who might have relied on the original communication.
B. Issue a written report to indi
Answer D is correct.
If a final engagement communication contains a significant error or omission, the CAE must communicate corrected information to all who
received the original communication (Perf. Std. 2421). Hence, the Standards do not require a writt
Internal audit activity policy requires that final engagement communications not be issued without a management response. An engagement with significant observations is complete except for management's response. Evaluate the following courses of action an
Answer C is correct.
Interim reports are used to communicate information that requires immediate
attention, to communicate a change in engagement scope for the activity under review, or to keep management informed of engagement progress when engagements e
During the working-paper review, an internal auditing supervisor finds that the internal auditor's observations are not adequately cross-referenced to supporting documentation. The supervisor will most likely instruct the internal auditor to
A. Eliminate
Answer D is
correct.
Cross-referencing is important because it simplifies review either during the engagement or subsequently by creating a trail of related items through the working papers. It thus facilitates preparation of the final engagement communic
An internal auditor makes inquiries of the floor manager, observes inventory-counting procedures, and inspects warehouse equipment to determine whether management's goals are being met. These evidence-gathering procedures are performed in which of the fol
Answer D is correct.
Methods of gathering evidence, such as making inquiries, observing inventory, and inspecting equipment are used in the field work phase of the engagement. This phase follows the determination of engagement objectives and scope, risk a
20. The purpose of including a time budget in an engagement work program is to
A. Provide a means of controlling and evaluating the progress of the
engagement.
B. Restrict the scope of the engagement.
C. Provide an objective means of evaluating the intern
Answer A is correct.
Supervision includes, among other things, ensuring the approved engagement program is completed unless changes are justified and authorized (PA 2340-1, para. 1). For this purpose, a time budget is necessary to evaluate and control the
Which of the following is least likely to be placed on the agenda for discussion
at a pre-engagement meeting?
A. Client personnel needed.
B. Objectives and scope of the engagement.
C. Expected starting and completion dates.
D. Sampling plan and key criter
Answer D is correct.
Possible objectives and scope for the engagement, the client personnel to whom the auditors need access, and the expected start and completion dates for the engagement are all appropriate matters for discussion at a pre-engagement mee
The chief
audit executive is responsible for engagement supervision. The most important form of supervision during the field work phase of engagements involves
A. Making sure that communications are accurate, objective, clear, concise, constructive, and t
Answer C is correct.
Supervision includes ensuring the approved engagement program is completed unless changes are justified and authorized (PA 2340-1, para. 1). Execution of the work program requires supervision during field work.
The other supervisory t
You are conducting an engagement to evaluate the organization's marketing effort. You agreed to keep the marketing vice president informed of your progress on a regular basis. What method should be used for those progress reports?
A. Oral or written inter
Answer A is correct.
Interim reports are written or oral and may be transmitted formally or informally. Interim reports are used to communicate information that requires
immediate attention, to communicate a change in engagement scope for the activity und
Engagement work programs testing controls ordinarily must
A. Reduce costly duplication of effort by ensuring that every aspect of an operation is examined.
B. Be generalized so as to be usable at all locations of a particular department.
C. Be generalized
Answer D is correct.
A work program must be adapted to the specific needs of the engagement after the
internal auditor establishes the engagement objectives and scope and determines the resources required. A pro forma (standard) work program is not approp
While planning an engagement, an internal auditor establishes engagement objectives to describe what is to be accomplished. Which of the following is a key issue to consider in developing engagement objectives?
A. The qualifications of the internal auditi
Answer C is correct.
Internal auditors
establish engagement objectives to address the risks associated with the activity under review. For planned engagements, the objectives proceed and align to those initially identified during the risk assessment proce
The effectiveness of an internal auditing engagement is related to the results and the action taken on those results. Which of the following activities contributes to engagement effectiveness?
A. Adhering to a time budget.
B. Having budget revisions
appro
Answer D is correct.
An exit meeting (post-engagement meeting) is an opportunity for discussion of engagement results, i.e., observations, conclusions, and recommendations. The effectiveness of an engagement is enhanced by the exit meeting because it prov
Which of the following items does not constitute evidence of proper supervision of an internal auditing engagement?
A. The internal audit manager carefully reviews all analytical
procedures performed by internal audit seniors during the preliminary planni
Answer D is correct.
Supervision includes ensuring the approved engagement program is carried out unless changes are justified and authorized (PA 2340-1, para. 1). Accordingly, the deviations from the planned engagement work program by the senior internal
Developing engagement observations, conclusions, and recommendations involves comparing the condition with the relevant standard or criterion. Which of the following choices best represents an appropriate standard or criterion to support engagement observ
Answer D is correct.
Acceptable industry standards, standards developed by professions or associations, standards in law and government regulations, and other sound business practices are usually deemed to be appropriate criteria.
Communication skills are important to internal auditors. The internal auditor should
be able to effectively convey all of the following to the engagement client except
A. The evaluations based on a preliminary survey of an engagement client.
B. Recommenda
Answer D is correct.
Internal auditors need to be skilled in oral and written communications so that they can clearly and effectively convey such matters as engagement objectives, evaluations, conclusions, and recommendations (PA 1210-1, para. 1). The int
Scope statements
for assurance engagements may include which of the following?
1. Boundaries of the process
2. Areas that are within the scope and those that are excluded
3. Time frame limitations
4. Final report distribution
A. 1, 2, and 3 only.
B. 1 and
Answer A is correct.
Audit scope statements (1) describe the limits of the engagement, (2) identify activities to be reviewed and any related activities that are excluded, and (3) specify a time frame for completion.
In a well-developed management environment, the internal audit activity
A. Focuses primarily on asset management and report results to the audit committee.
B. Interfaces primarily with senior management, minimizing interactions with line managers who are
Answer D is correct.
Internal auditors discuss conclusions and recommendations with appropriate levels of management before the chief audit executive (CAE) issues the final engagement
communications (PA 2440-1, para. 1). The level of participants in the d
The scope statement of an engagement communication should
A. Identify the activities reviewed and describe the nature and extent of work performed.
B. Define the standards, measures, or expectations used in evaluating engagement observations.
C. Communica
Answer A is correct.
Scope statements identify the audited activities and may include supportive information such
as time period reviewed and related activities not reviewed to delineate the boundaries of the engagement. They may describe the nature and e
Documentation required to plan an internal audit engagement includes information that
A. Resources needed to complete the engagement were considered.
B. Intended engagement observations have been clearly identified.
C. Internal audit activity resources ar
Answer A is correct.
Internal auditors must
develop and document a plan for each engagement, including the engagement's objectives, scope, timing, and resource allocations (Perf. Std. 2200).
As part of planning an engagement, the internal auditor in charge does all of the following except
A. Distribute reports from meetings with management.
B. Determine the period covered.
C. Determine to whom engagement results will be communicated.
D. Condu
Answer C is correct.
The CAE
determines how, when, and to whom engagement results will be communicated (PA 2200-1, para. 5).
A final communication issued by an internal auditor following an assurance engagement should contain an expression of opinion when
A. The internal auditors' work is to be used by external auditors.
B. A full-scope engagement has been conducted in an area.
Answer C is correct.
Final communication of engagement results must, where appropriate,
contain the internal auditor's opinion and/or conclusions (Impl. Std. 2410.A1). Improving communications with the reader satisfies the appropriateness criterion.
Field work is a systematic process of objectively gathering information about an entity's operations, evaluating it, and determining whether those operations meet acceptable standards. Which of the following is not part of the work performed during field
Answer B is correct.
The engagement
work program is the culmination of the planning process.
Which of the following is an appropriate statement of an engagement objective?
A. To observe the physical inventory count.
B. To include information about stockouts in the final engagement communication.
C. To search for the existence of obsolete inventor
Answer D is correct.
An engagement objective is a broad statement developed by internal auditors to define intended engagement
accomplishments (The IIA Glossary). Determining whether inventory stocks are sufficient to meet projected sales is an engagement
Which of the following should not be one of the primary reasons why an internal auditor may communicate sensitive information outside the normal chain of command?
A. The desire to stop the wrongful, harmful, or improper activity.
B. The internal auditor d
Answer B is correct.
An internal auditor who communicates
sensitive information outside the chain of command should be motivated by the desire to stop the wrongful, harmful, or improper activity; legal advice; or a professional obligation. A personal disa
A work program for a comprehensive assurance engagement to evaluate a purchasing function should include
A. Procedures arranged by relative priority based upon perceived risk.
B. A focus on risks affecting the financial statements as opposed to controls.
Answer D is correct.
Work programs are a necessary part of engagement planning. They include the procedures for collecting, analyzing, interpreting, and documenting information during the engagement (PA 2240-1, para. 2).
The best control over the work on which internal auditors' opinions are based is
A. Preparation of engagement working papers.
B. Supervisory review of all engagement work.
C. Preparation of time budgets for internal audit
activities.
D. Staffing of intern
Answer B is correct.
The engagement must be properly supervised to ensure objectives are achieved, quality is ensured, and staff is developed (Perf. Std. 2340). Supervision includes (1) ensuring the auditors possess the requisite knowledge, skills, and ot
A relatively new internal auditor is completing a final engagement communication. The communication should most appropriately be signed by the
A. Internal
auditor and the manager of the activity under review to indicate that they concur with the report.
B
Answer C is correct.
The CAE determines which internal auditor is authorized to sign the report (PA 2410-1, para. 15).
If an auditor's preliminary evaluation of internal controls results in an observation that controls may be inadequate, the next step is to
A. Expand audit work prior to the preparation of an engagement final
communication.
B. Prepare a flowchart depicting
Answer A is correct.
After identifying the risks, the auditor determines the procedures to be performed and the scope (nature, timing, and extent) of those procedures (PA 2210-1, para. 3). If the preliminary evaluation indicates increased control risk, th
The manner in which data and evidence is gathered, evaluated, and summarized for presentation should be done with care and precision. Which
quality of communications does this statement best describe?
A. Objective.
B. Constructive.
C. Accurate.
D. Timely.
Answer C is correct.
Communications should be accurate, objective, clear, concise, constructive, complete, and timely (Perf. Std. 2420). Accurate communications are free from errors and distortions and are faithful to the underlying facts (Inter. Std. 242
Internal auditors must develop and document a plan for each
engagement. The planning process should include all the following except
A. Obtaining background information about the activities to be reviewed.
B. Identifying sufficient information to achieve
Answer B is correct.
Internal auditors must develop and document a plan for each engagement, including the engagement's objectives, scope, timing, and resource allocations (Perf. Std. 2200). Identifying sufficient information to achieve engagement objecti
The content and format of engagement communications may vary. However, according to the Standards, a necessary element is statement of
A. Documentation of previous oral communications.
B. The status of observations from prior engagement communications.
C.
Answer D is correct.
Communications must include the engagement's objectives and scope as well as applicable conclusions, recommendations, and action plans (Perf. Std. 2410).
Exit
meetings serve to ensure the accuracy of the information used by an internal auditor. A secondary purpose of an exit meeting is to
A. Agree to the appropriate distribution of the final engagement communication.
B. Brief senior management on the resul
Answer C is correct.
Discussion of conclusions and recommendations with the engagement client not only provides a quality control review but is also a courtesy that enhances the internal auditor-client relationship. In
addition, the exit meeting is an imp
In beginning an engagement, an internal auditor reviews written procedures that detail segregations of responsibility adopted by management to strengthen internal controls. These written procedures should be viewed as which attribute of an observation?
A.
Answer D is correct.
Criteria are the standards, measures, or expectations used in making an evaluation and/or verification (the correct state) (PA 2410-1,
para. 7). The written procedures represent the standards (criteria) against which an observation co
Before an assurance engagement can be performed, the auditor must identify appropriate criteria. The sources of such criteria are least likely to include
A. Benchmarks for the leading firms in the industry.
B. Historical cost information for the processes
Answer D is correct.
Acceptable industry standards, standards developed by professions or
associations, standards in law and government regulations, and other sound business practices are usually deemed to be appropriate criteria.
When making a presentation to management, the internal auditor wants to report observations, conclusions, and recommendations and to stimulate action. These objectives are best accomplished by
A. Delivering a lecture on the engagement results.
B. Showing
Answer C is correct.
Using audiovisual aids to
support a discussion of major points results in the greatest retention of information. One study concluded that 85% of the information presented in this way will be remembered after 3 hours, and 65% after 3 d
Successful communication between the internal auditor and the engagement client partially depends on achieving appropriate emphasis so that both parties are aware of the most important points in their discussion. Which of the following approaches provides
Answer B is correct.
Graphic illustrations (e.g., pictures, charts, or graphs), oral and written repetition such as summaries, and itemized lists (bulleted or numbered) are good ways of emphasizing information.
A purpose of the internal auditors' exit meeting with appropriate levels of management is to
A. Generate commitment for appropriate managerial action.
B. Obtain information to evaluate internal control.
C. Present the final engagement
communication to the
Answer A is correct.
Discussion of conclusions and recommendations with the engagement client not only provides a quality control review but is also a courtesy that enhances the internal auditor-client relationship. In addition, the exit meeting is an imp
Engagement working papers are reviewed to ensure that
A. They are properly referenced for easy follow-up within the next year.
B. They meet or exceed the work standards
of the organization's external auditors.
C. They are properly cross-referenced to the
Answer D is correct.
All engagement working papers are reviewed to ensure they support engagement communications and necessary audit procedures are performed (PA 2340-1, para. 3).
Which of the following statements is true with respect to a time budget for an internal audit engagement?
A. Time budgets should be used for financial audits, but not for
operational audits.
B. Time budgets should be strictly adhered to, regardless of cir
Answer D is correct.
A budget is a plan that contains a quantitative statement of expected results. It may be defined as a quantified program. All engagement projects and other assignments must be kept under budgetary control. Time budgets for engagement
An internal auditor's final engagement communication contains the statement: "The training department
expended $100,000 on the development of a training course that cannot be used." That statement is an example of
A. Criteria.
B. Cause.
C. Recommendation.
Answer D is correct.
The effect attribute is the risk or exposure the organization and/or others encounter because the condition is not consistent with the criteria (the impact of the difference) (PA 2410-1, para. 7). The description of the needless expen
Which of the following statements
is an engagement objective?
A. Recompute each month's bank reconciliation.
B. Analyze the pattern of any cash shortages.
C. Observe the deposit of the day's cash receipts.
D. Evaluate whether cash receipts are adequately
Answer D is correct.
Engagement objectives are broad statements developed by internal auditors that define intended engagement accomplishments (The IIA Glossary). Procedures are the means to reach conclusions related to the objectives. Evaluating
whether
According to the Standards, when should a signed report be issued?
A. Only if required by the particular engagement.
B. At predetermined stages as the engagement progresses.
C. Whenever an opinion is expressed.
D. At the conclusion of an engagement.
Answer D is correct.
A signed report is issued after the engagement's completion (PA 2410-1, para. 15).
The scope section of an internal auditor's final
engagement communication should identify
A. The engagement techniques used.
B. Any unresolved differences with engagement clients.
C. Any limitations imposed.
D. The sampling methodology employed.
Answer C is correct.
Since limitations set the boundaries of the engagement, they must be identified in the scope section.
In planning an engagement, the internal auditor establishes objectives to address the risk associated with the activity.
Risk is the
A. Uncertainty of the occurrence of an event that could affect the achievement of objectives.
B. Failure to adhere to orga
Answer A is correct.
Risk is the possibility that an event will occur having an impact on the achievement of objectives. Risk is measured in terms of impact and likelihood (The IIA Glossary).
An auditor experienced in air-quality issues discovered a significant lack of knowledge about legal requirements for
controlling air emissions while interviewing the manager of the environmental, health, and safety (EHS) department. The auditor should
A.
Answer D is correct.
An engagement's objectives and procedures address the risks associated with the activities under review. The preliminary risk assessment identifies significant activities requiring examination as potential objectives. Thus, the audito
One of the primary roles of an engagement work program
is to
A. Provide for a standardized approach to the engagement.
B. Document an internal auditor's evaluations of controls.
C. Assess the risks associated with the activity under review.
D. Serve as a
Answer D is correct.
Among other things, work programs state the objectives of the engagement, identify technical requirements, and state the nature and extent of testing required (PA 2200-1, para. 1).
The established scope of the
engagement must be sufficient to satisfy the objectives of the engagement. When developing the objectives of the engagement, the internal auditor considers the
A. Information included in the engagement work program.
B. Probabi
Answer B is correct.
Internal auditors must consider the probability of significant errors, fraud, noncompliance, and other exposures when developing assurance engagement objectives (Impl. Std. 2210.A2).
The internal
auditor-in-charge has just been informed of the next engagement, and the engagement team has been assigned. Select the appropriate phase for finalizing the engagement budget.
A. After the completion of all field work.
B. After the preliminary
Answer B is correct.
A survey permits an informed approach to planning and carrying out engagement work and is an effective tool for allocating the internal audit activity's resources where they can be used most effectively. Among
other things, the result
One purpose of the exit meeting is for the internal auditor to
A. Require corrective action.
B. Review and verify the appropriateness of the engagement communication based upon client input.
C. Review the performance of internal auditors assigned to the e
Answer B is correct.
Internal auditors discuss conclusions and recommendations with appropriate levels of management before the CAE issues the final engagement
communications. This is usually accomplished during the course of the engagement or at post-eng
Which of the following is most appropriate for inclusion in the summary of a final engagement communication?
A. Reference to areas not covered by the engagement.
B. Engagement client responses to recommendations.
C. A concise statement of engagement obser
Answer C is correct.
A signed report is issued after the engagement's completion. Summary
reports highlighting engagement results are appropriate for levels of management above the engagement client (PA 2410-1, para. 15).
A docket is to a judge as what is to an auditor performing an engagement?
A. Audit report.
B. Work program.
C. Audit documentation.
D. Charter.
Answer B is correct.
Internal auditors must develop and document work programs that achieve the engagement objectives (Perf. Std. 2240). Work programs establish the
procedures for collecting, analyzing, interpreting, and documenting information during the
Final engagement communications should, at a minimum, contain the purpose, scope, and results of the engagement. Engagement observations and recommendations should be based on four attributes: criteria, condition, cause, and effect. The cause can best be
Answer D is correct.
The cause attribute is the reason for the difference between the expected and actual
conditions (PA 2410-1, para. 7). Cause provides the answer to the question "Why?" and should be the basis for corrective action.
Writing an engagement work program most likely occurs at which stage of the engagement?
A. Subsequent to evaluating risk management and control systems.
B. As the engagement is performed.
C. During the planning stage.
D. At the end of each engagement when
Answer C is correct.
The engagement work program is the
culmination of the planning stage.
If an engagement client's operating standards are vague and thus subject to interpretation, the internal auditor must
A. Interpret the standards in their strictest sense because standards are otherwise only minimum measures of acceptance.
B. Determine bes
Answer D is correct.
Adequate criteria are needed to evaluate controls. Internal auditors must ascertain the extent to which management has established
adequate criteria to determine whether objectives and goals have been accomplished. If adequate, intern