Question 1: Which of the following do you think are benefits that internal auditing can provide to management?

1. Provide an opinion on the fairness of the financial statements.
2. Ensure risks are appropriately identified and managed
3. Ensure that the organization is complying with legal requirements.
4. Ensure that resources are acquired economically, used efficiently and adequately protected.

Question 2: The internal auditing profession is believed to have advanced primarily as a consequence of

Question 3: What would you think should be the proper organizational role of internal auditing?

Question 4: The primary objective of internal auditing is to

Question 5: The authority of the internal audit activity is limited to that granted by

Question 6: An internal audit charter is being drafted for a newly formed internal audit activity. Which of the following best describes the appropriate organizational status that should be incorporated into the charter?

Question 7: In order to remain effective the internal audit activity should be free from the effects of irresponsible policy changes by management. The most effective way to assure that freedom is to

Question 8: An internal auditor needs to maintain his or her independence and objectivity. Which of the following activities do you think would not impair the objectivity of an internal auditor?

1. Recommending standards of control for a new information system application
2. Drafting procedures for running a new computer application to ensure that proper controls are installed
3. Performing reviews of procedures for a new computer application before it is installed

Question 9: You are the chief audit executive of an internal audit department. Management has requested your department to perform an engagement to recommend procedures and policies for improving management control over credit sales of a major division. As the chief audit executive you should

Question 10: During the course of an engagement, an internal auditor makes a preliminary determination that a major division has been inappropriately capitalizing research and development expense. The engagement is not yet completed, and the internal auditor has not documented the problem or determined that it really is a problem. However, the internal auditor is informed that the chief audit executive has received the following communication from the president of the organization:

“The controller of Division B informs me that you have discovered a questionable account classification dealing with research and development expense. We are aware of the issue. You are directed to discontinue any further investigation of this matter until informed by me to proceed. Under the confidentiality standard of your profession, I also direct you not to communicate with the outside auditors regarding this issue.”

Which of the following is an appropriate action for the CAE to take regarding the questionable item?

Question 11: Which of the following comments is (are) true regarding the assessment of risk associated with two projects that are competing for limited internal audit resources?

1. Activities that are requested by the board should always be considered higher risk than those requested by management.
2. Activities with higher financial budgets should always be considered higher risk than those with lower financial budgets.
3. Risk should always be measured by the potential monetary or other adverse exposure to the organization.

Question 12: Which of the following represent(s) appropriate internal audit action in response to the risk assessment process?

1. The low-risk areas may be delegated to the external auditor, but the high-risk areas should be performed by the internal audit activity.
2. The high-risk areas should be integrated into an engagement work schedule along with the high-priority requests of senior management and the audit committee.
3. The risk analysis should be used in determining an annual engagement work schedule; therefore, the risk analysis should be performed only on an annual basis.

Question 13: Policies and procedures should be established to guide the internal audit activity. Which of the following statements is false with respect to this requirement?

Question 14: As the chief audit executive, you have determined that the acquisition of some expensive, state-of-the-art software for paperless working paper files will be useful. Identify the preferred method for presenting your request to senior management.

Question 15: Factors that should be considered when assessing risk in a functional area include

1. Volume of transactions
2. Degree of system integration
3. Years since last engagement
4. Significant management turnover
5. Value of assets at risk
6. Average value per transaction
7. Results of last engagement