The purposes of the Standards include all of the following except

Establishing the basis for the measurement of internal audit performance.

Guiding the ethical conduct of internal auditors.

Stating basic principles that represent the practice of internal auditing as it should be.

Fostering improved organizational processes and operations.

 Internal audit activities may involve which of the following?

Assurance services.

Consulting services.

Both assurance and consulting services.

Neither assurance nor consulting services.

 

An internal auditor often faces special problems when performing an engagement at a foreign subsidiary. Which of the following statements is false with respect to the conduct of international engagements?

The IIA Standards do not apply outside of the United States.The internal auditor should

determine whether managers are in compliance with local

laws.There may be justification for having different organizational

policies in force in foreign branches.

It is preferable to have multilingual internal auditors

conduct engagements at branches in foreign nations.

The function of internal auditing, as related to communicating results, is to

Ensure compliance with reporting procedures.

Review the expenditure items and match each item with the expenses incurred.

Determine whether any employees are expending funds without authorization.

Identify inadequate controls that increase the likelihood of unauthorized expenditures.

The function of internal auditing, as related to communicating results, is to

Ensure compliance with reporting procedures.

Review the expenditure items and match each item with the expenses incurred.Determine whether any employees are expending funds without authorization.

Identify inadequate controls that increase the likelihood of unauthorized expenditures.

The Standards consist of three types of standards. Which standards apply to the characteristics of organizations and parties providing internal auditing services?

Implementation Standards.

Performance Standards.

Attribute Standards.

Independence Standards.

 

What is the responsibility of the internal auditor with respect to fraud?

The internal auditor should have sufficient knowledge to

identify the indicators of fraud but is not expected to be an expert.

The internal auditor should have the same ability to detect fraud as a person whose primary responsibility is

detecting and investigating fraud.An internal auditor should have sufficient knowledge

and training so that (s)he is able to detect fraud.An internal auditor’s primary role is to detect and

investigate fraud.

In planning an engagement, internal auditors should consider which of the following items?

I. The objectives of the activity being reviewed and the means by which the

activity controls performance.

II. The adequacy and effectiveness of the activity’s risk management and

control systems compared to a relevant control framework or model.

III. The opportunities for making significant improvements to the activity’s

information technology systems and control systems.

I and II.

II and III.

I and III.

I, II, and III.

Internal auditors should communicate results. Communications for assurance engagements should include

I. Limitations on distribution to outside parties

II. The auditor’s overall opinion when appropriate

III. Recommendations and action plans when appropriate

II only.

III only.

I and II only.

I, II, and III.

The work of the internal audit activity includes evaluating and contributing to the improvement of risk management systems. Risk is

I. The negative effect of events certain to occur

II. Measured in terms of impact

III. Measured in terms of likelihood

I only.

I and II only.II and

III only.I, II,

and III.

The chief audit executive is best defined as the

Inspector general.

Person responsible for the internal audit function.

Outside provider of internal audit services.

Person responsible for overseeing the contract with the outside provider of internal audit services.

Internal auditors should be objective. Objectivity

Requires internal auditors not to subordinate their judgment on audit matters to that of others.

Is required only in assurance engagements.

Is managed at the individual auditor, engagement, functional, and organizational levels.

Prohibits internal auditors from providing consulting services relating to operations for which they had previous

responsibility.

The term “risk” is best defined as the possibility that

An internal auditor will fail to detect a material misstatement that causes financial statements or internal reports to be

misstated or misleading.

An event could occur affecting the achievement of objectives.

Management will, either knowingly or unknowingly, make decisions that increase the potential liability of the

organization.Financial statements or internal records will contain material

misstatements.

Use of external service providers with expertise in health care benefits is appropriate when the internal audit activity is

Evaluating the organization’s estimate of its liability for postretirement benefits, which include health care benefits.

Comparing the cost of the organization’s health care program with other programs offered in the industry.

Training its staff to conduct an audit of health care costs in a major division of the organization.

All of the answers are correct.

Your organization has selected you to develop an internal audit activity (IAA). Your approach will most likely be to hire

Internal auditors each of whom possesses all the skills required to handle all engagements.

Inexperienced personnel and train them the way the organization wants them trained.

Degreed accountants because most internal audit work is accounting related.

Internal auditors who collectively have the knowledge and skills needed to perform the responsibilities of the internal audit activity.

 

The internal audit activity collectively must possess or obtain certain competencies, including proficiency in

Internal audit procedures and techniques.

Accounting principles and techniques.

Management principles.

Marketing techniques.

internal auditors must possess the knowledge, skills, and other competencies essential to the performance of their individual responsibilities. Consequently, all internal auditors should be proficient in applying

Internal auditing

standards.Quantitative

methods.Management

principles.Structured systems analysis.

An internal auditor must have the knowledge, skills, and other competencies needed to perform their individual responsibilities. Which of the following properly describes the level of knowledge, skill, or other competency required?  Internal auditors must have

Proficiency in applying internal auditing standards and procedures

without extensive recourse to technical research and assistance.

Proficiency in applying knowledge of accounting and information

technology to specific or potential problems.

An understanding of broad techniques used in supporting and

developing engagement observations and the ability to

research the proper procedures to be used in any engagement

situation.A broad appreciation of accounting

principles and techniques during engagements involving the financial

records and reports of the organization.

 

In exercising due professional care, internal auditors must consider which of the following?

I. The relative complexity, materiality, or significance of matters to which

assurance procedures are applied

II. The extent of assurance procedures necessary to ensure that all

significant risks will be identified

III. The probability of significant errors, irregularities, or noncompliance

I and II only.

II and III only.

I and III only.

I, II, and III.

Fact Pattern: A staff internal auditor performed a portion of an engagement to review an organization’s marketing

function. In particular, the internal auditor evaluated the function’s effective and efficient use of resources to identify

I. Underused facilities

II. Overstaffing or

understaffing

III. Nonproductive work

IV. Procedures that

were not cost

justified

To test for underused facilities, the internal auditor performed a complete walk-through of all spaces assigned to the marketing function and evaluated the use of both space and capital equipment. The internal auditor analyzed reports on space usage for the last year and concluded that facilities were neither underused nor used at maximum capacity.

To test for overstaffing or

understaffing, the internal

auditor compared current

staffing levels with a staffing

analysis recently completed

by an independent

contractor. Because the

staffing analysis used work

standards and service

demands to provide factual

and reliable information on

staffing requirements, the

internal auditor was able to

conclude that staffing levels

were optimal.

To test for nonproductive

work, the internal auditor

interviewed an employee

from each level, and, based

upon their responses,

concluded that no significant

amount of nonproductive

work was being performed.

Thus, the internal auditor

concluded that additional

engagement work to search

for procedures that were not

cost justified would not be

necessary.

 In reference to requirements I and II, due professional care

Was exercised because the internal auditor applied reasonable care and competence in both areas.

Was not exercised because the internal auditor failed to apply reasonable care regarding requirement II.

Was not exercised because the internal auditor failed to apply reasonable care regarding requirements I and II.

Was not exercised because the internal auditor failed to apply reasonable care regarding requirement I.

With regard to the exercise of due professional care, an internal auditor should

Consider the relative materiality or significance of matters to which assurance procedures are applied.Emphasize the potential benefits of an engagement

without regard to the cost.Consider whether criteria have been established to determine whether goals are achieved, not whether

those criteria are adequate.Select procedures that are likely to provide absolute

assurance that irregularities do not exist.