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Which of the following scenarios best demonstrates the application of internal audit proficiency?

A.

Management requests that the internal audit activity review and provide feedback on its strategic plans for a merger, but the chief audit executive (CAE) declines the engagement due to the team's lack of experience with mergers.

B.

A CAE reassigns auditors from other audits to perform testing on all of the fixed asset additions for a period, including amounts below the materiality level stated by external auditors.

C.

Due to the routine and recurring nature of bank branch audits, an audit manager often excludes detailed planning at the beginning of the audit and immediately performs fieldwork.

D.

During fieldwork, an auditor observed a lack of segregation of duties over cash management. The auditor reported this observation to his supervisor, who decided that the area should be examined in a subsequent audit.

Which of the following best describes the type of organizational culture known as adaptability culture'?

A.

A results-oriented culture that values competitiveness and personal initiative

B.

A culture that emerges in quick-response and high-risk decision-making environments

C.

A culture that is characterized by low involvement with environmental and health issues

D.

A culture that places high value on participation and meeting the needs of employees.

Which of the following activities should the chief audit executive perform to ensure compliance with an organization's code of conduct?

A.

Act as an advisor to the committee responsible for reviewing violations of the code.

B.

Review and adjudicate all violations of the code of conduct.

C.

Lead the committee responsible for the oversight of the code.

D.

Implement a system of procedures to inform all employees of the code.

An investment advisory firm purchased professional liability insurance to offer protection from lawsuits brought by customers claiming they received poor or erroneous advice. Which of the following best describes this risk management technique?

A.

Mitigation.

B.

Acceptance

C.

Transfer.

D.

Avoidance

Six months after an employee was transferred to the internal audit activity his former operating manager requested that he return to assist a project team with the evaluation of a new pricing module for the organization’s online ordering system According to IIA guidance which of the following statements is true?

A.

The auditor cannot be assigned to this project, as it has been fewer than 12 months since he was transferred from that department.

B.

Another internal auditor should be appointed to the engagement to preserve the independence of the internal audit activity

C.

The auditor cannot participate in the assignment, as providing an opinion would impair his objectivity

D.

The auditor may participate on the project, as the nature of the assignment is consulting

Which of the following scenarios best illustrates due professional care?

A.

An internal auditor who previously worked in the payroll department within the last year was intentionally excluded by the chief audit executive from the audit team assigned to a payroll audit

B.

While performing a payroll audit an auditor became skeptical about significant payments made to a manager. The auditor sought to determine whether these payments were reasonable through discussion with a manager in a different department in the organization

C.

The head of the payroll department being audited is a business partner of the engagement supervisor During the audit the engagement supervisor sought to maintain his objectivity by not participating in fieldwork

D.

An auditor assigned to a payroll audit was unable to reperform some complex payroll computations for a small number of employees The sum of these payments was below the materiality thresholds provided so the auditor did not perform further tests

According to IIA guidance, which of the following statements is true regarding ISO 31000?

A.

The key principles approach checks whether each element of the risk management process is in place.

B.

The framework is effective in addressing the organization's structure, size, and risk profile but not its culture objectives.

C.

The end point for improving an organization s approach to risk management should be a gap analysis that evaluates any changes.

D.

A combination of the three primary approaches to the framework generally yields the most information despite the complexity

Which of the following best describes organizational governance processes?

A.

Processes employed by internal and external assurance providers to authorize, direct, and provide oversight to management to better enable the meeting of organizational objectives

B.

Processes employed by the board of directors to authorize and provide guidance and oversight to management to promote the achievement of organizational objectives.

C.

Processes employed by the board of directors and senior management to mitigate risks to acceptable levels.

D.

Processes employed by risk owners to mitigate risks to acceptable levels within the organization's risk appetite

Which of the following scenarios best illustrates a rationalization as the root cause of potential fraud?

A.

Managers who have been with the organization for several decades become aware that newly hired, younger managers are being moved more quickly into senior positions.

B.

The controller at a nationwide manufacturing company recently opted to no longer require two-week mandatory vacations for accounting staff.

C.

Security cameras that monitor cash handling at the register are not functioning.

D.

The organization is slowly phasing out three mature products that produce the highest commissions for the sales staff

Which of the following should catch the internal auditor's attention as a potential red flag for fraud?

A.

The accounting unit keeps detailed records and preserves supporting documentation in excess of company requirements

B.

One of the subsidiaries has more bank accounts than any other comparable subsidiary

C.

The same external audit firm has been with the company for three years without rotation

D.

The arithmetic median tenure of employees working at production facilities is 15 years

In which of the following scenarios would the chief audit executive (CAE) be required to decline the assignment?

A.

The CAE would need to procure external services to deliver the internal audit assurance program.

B.

There is no expertise within the internal audit team for detecting and investigating fraud.

C.

There is no expertise within the internal audit team for auditing an IT engagement.

D.

There is no available expertise on the internal audit team to perform a consulting engagement

According to IIA guidance, which of the following statements is true regarding risk management in an organization?

A.

The risk management function has the sole responsibility for identifying and managing risks in all departments

B.

Risk management is a core responsibility of the internal audit activity

C.

The internal audit activity should consider the organization’s maturity, structure, and the competitive environment to establish the organization’s risk appetite

D.

The internal audit activity may use a risk management or control framework to assist in risk identification

Management is installing security cameras to identify unauthorized physical access to the organization's warehouse. This is an example of which of the following types of controls?

A.

Detective controls.

B.

Key controls.

C.

Primary controls.

D.

Preventive controls

Which of the following is an example of a risk avoidance strategy?

A.

Hedging against exchange rate variations.

B.

Limiting access to an organization’s data center.

C.

Selling a nonstrategic business unit.

D.

Outsourcing a high-risk activity

Which of the following activities aligns with The IIA's Core Principles for the Professional Practice of Internal Auditing?

A.

The chief audit executive reports to senior management for compensation decisions and communications of audit results to the board

B.

Final reports from consulting engagements show the summary of findings, and the internal auditor’s advice is clearly distinct and separate from management's decisions

C.

Internal auditors rotate through operations and management positions then perform audit engagements on these areas to ensure timely application of their knowledge

D.

Due to limited resources, internal auditors prioritize assurance on internal controls and risk management and exclude evaluating governance processes, which are deemed outside of their core responsibilities