Question 1

Which of the following actions by a chief audit executive is most likely to prevent exaggerated sales reports by division management?

I. Hire a new internal auditor who has fraud investigation credentials.

II. Assist the controller in developing and monitoring a series of business process indicators which are historically correlated with, but independent of, sales.

III. Announce a series of internal audit engagements focusing on compliance with corporate sales-reporting policies.

IV. Ask the president and the board to issue a statement of corporate policy stressing the importance of accurate management reporting and the negative consequences of intentional misreporting.

Options :

A : I and II only

B : II and III only

C : III and IV only

D : I, II, III, and IV.

Answer: C

Question 2

Regarding an organization's decision to retain an external audit firm, the chief audit executive (CAE) should:

Options :

A : Work with the organization-s chief financial officer to evaluate the external auditor-s performance and together make the decision.

B : Not be involved in this decision process as it would compromise the CAE-s objectivity.

C : Evaluate the external auditor-s performance and retain the external auditor if quality and cost criteria are met.

D : Assist the audit committee by facilitating the development of an appropriate evaluation process.

Answer: D

Question 3

If management has not established a risk management process, the internal audit activity could.

Options :

A : Take a proactive role that supplements traditional assurance activities.

B : Identify and mitigate risks to the organization

C : Assume responsibility for the management of identified risks.

D : Assume primary responsibility for determining if adequate and effective processes are in place.

Answer: A

Question 4

The internal audit activity is planning a procurement audit and needs to obtain a thorough understanding of the subcontracting process, which can involve multiple individuals in multiple countries.Which of the following internal audit tools would be most effective to document the process and the key controls?

Options :

A : Internal control checklist.

B : Procurement employee survey.

C : Cross-functional flow chart.

D : Segregation of duties matrix.

Answer: C

Question 5

Which of the following scenarios involving the chief audit executive (CAE) is most likely to impair the independence of the internal audit activity?

Options :

A : The CAE fails to ensure internal audit staff receive training annually.

B : The CAE fails to rotate internal audit staff, resulting in the same internal auditors conducting the same engagements year after year.

C : The CAE reports directly to the organization-s chief financial officer.

D : The CAE reports directly to the board.

Answer: C

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