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Qualified Internal Auditor Questions and Answers

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Questions # 11:

An organization uses a service bureau to process its hourly payroll transactions. The internal auditor is concerned that the hourly payroll for the year has been processed correctly and, in particular, the computation of employee withholding for pension contributions is in accordance with the union contract, which specifies charges each quarter.

Which of the following audit procedures would best accomplish the audit objective?

Options:

Select a random sample of all hourly payroll transactions for the reporting period, re-compute pay and withholding items, and compare the result with that obtained from the service bureau.

Select a stratified sample of all hourly and salaried payroll transactions for an entire reporting period, perform the necessary activities, and then compare the result with that obtained from the service bureau.

Select a discovery sampling of all payroll transactions for an entire reporting period and then follow up on any findings.

Submit a set of test data to the service bureau during an annual audit and compare the service bureau's processing with the auditor's predetermined computations on the same test data.

Answer

Questions # 12:

In order for internal auditors to be able to recognize potential fraud, they must be aware of the basic characteristics of fraud. Which of the following is not a characteristic of fraud?

Options:

Intentional deception.

Taking unfair or dishonest advantage.

Perpetration for the benefit or detriment of theorganization.

Negligence on the part of executive management.

Answer

Questions # 13:

Which of the following documents would provide the most persuasive evidence concerning the existence and valuation of a receivable?

Options:

A credit approval document supported by the customer's audited financial statements.

A copy of a sales invoice to the customer in the auditee's records.

A positive confirmation received directly from the customer.

A customer's purchase order in the auditee's records related to the credit sale.

Answer

Questions # 14:

Computer fraud is discouraged by

Options:

Being willing to prosecute.

Ostracizingwhistle-blowers.

Overlooking inefficiencies in the judicial system.

Accepting the lack of integrity in the system.

Answer

Questions # 15:

The internal auditors of a financial institution are auditing the institution's investing and lending activities. During the last year, the institution has adopted new policies and procedures for monitoring investments and the loan portfolio. The auditors know that the organisation has invested in new types of financial instruments during the year and is heavily involved in the use of financial derivatives to appropriately hedge risks

The audit committee has expressed concern that the financial institution has been taking on higher-risk loans in pursuit of short term profit goals.

Which of the following audit procedures would provide the least amount of information to address this audit concern?

Options:

Perform an analytical review of interest income as a percentage of the investment portfolio in comparison with a group of peer financial institutions.

Take a random sample of loans made during the period and compare the riskiness of the loans with that of a random sample of loans made two years ago.

Perform an analytical review that involves developing a chart to compare interest income plotted over the past ten years.

Develop a multiple regression time series analysis of income over the past five years, including such factors as interest rate in the economy, size of loan portfolio, and dollar amount of new loans each year.

Answer

Questions # 16:

In order to ensure the proper addition/deletion of authorizations in an operational audit of data access security, an internal auditor would verify that

Options:

Individuals who are not employees have no access privileges.

Revoked access privileges are cancelled on a weekly cycle.

Access privileges are activated promptly after they areauthorized.

A systemsprogramkeeps records of all additions/deletions of access changes.

Answer

Questions # 17:

Viba, who is audit senior on the in progress audit of Weave plc, has recently placed her CV with a recruitment agent. She has had no feedback from the agent, with whom she has a meeting on Friday. The agency is currently carrying an advert for financial controller at Weave plc, but the advert does not give the company’s name.

This represents:

Options:

A self-interest threat

An intimidation threat

A management threat

No threat

Answer

Questions # 18:

Which of the following is a particular activity of internal audit function?

Options:

Special investigations, for instance, into suspected fraud

Confirm that the final result (the sum) is correct

To evaluate the system of internal control that are mainly concerned with the financial statements and accounting

To give an opinion on overall fairness of the financial statements and accounting

Answer

Questions # 19:

Which of the following control procedures would provide the greatest assurance that all donations to a non-profit organization are immediately deposited to the organization’s account?

Options:

Use a lockbox to receive all donations.

Perform periodic internal audits of theorganization’scash receipts by tracing deposits to the original posting in the cash receipts records.

Require that all donations be made by cheque.

Require issuance of a confirmation receipt to all donors, with the receipt issued by the person who opens and deposits the cash receipts.

Answer

Questions # 20:

The purchasing manager of a manufacturing company was concerned with the rising prices of some direct materials provided by a supplier. The purchasing manager told the supplier to either maintain the current prices or withdraw as a supplier for the company's direct materials. The supplier devised a plan to circumvent the purchasing manager's intent without actually violating the purchasing manager's mandate.

Which one of the following is the probable action taken by the supplier?

Options:

The supplier maintained prices in the short run but later returned to a pattern of increasing prices.

The supplier decided to stop providing the direct materials to the manufacturing company, since holding the line on prices would have a negative impact.

The supplier maintained prices but substituted a lower grade of direct materials.

The supplier worked through the president of the manufacturing company to force the purchasing manager to cancel the mandate.

Answer

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