Question 1. In an audit of a nonprofit organization's special fund, the primary audit objective would be to determine if the entity:
a. Complied with existing fund requirements and performed specified activities.
b. Managed its resources economically and efficiently.
c. Prepared its financial statements in accordance with generally accepted accounting principles.
d. Applied the funds in a way that would benefit the greatest number of people.
Question 2. The primary audit objective for a compliance audit of restricted funds at a government supported university would be the determination of:
a. Compliance with accepted accounting principles.
b. Adequacy of the institution's budget process.
c. Accuracy of financial reports.
d. Approval for expenditure of restricted funds.
Question 3. Which technique is most appropriate for testing the quality of the preaudit of payment vouchers described in an internal control questionnaire?
a. Analysis
b. Evaluation
c. Verification
d. Observation.
Question 4. The internal audit department of a large corporation has established its operating plan and budget for the coming year. The operating plan is restricted to the following categories: A prioritized listing of all audits, staffing, a detailed expense budget, and the commencement date of each audit. Which of the following best describes the major deficiency of this operating plan?
a. Requests by management for special projects are not considered.
b. Opportunities to achieve operating benefits are ignored.
c. Measure ability criteria and targeted dates of completed are not provided.
d. Knowledge, skills, and disciplines required to perform work are ignored.
Question 5. An operational audit of the production function includes an audit procedure to compare actual costs to standard costs. The purpose of this operational audit procedure is to:
a. Determine the accuracy of the system used to record actual costs.
b. Measure the effectiveness of the standard cost system.
c. Assess the reasonableness of standard costs.
d. Assist management in its evaluation of effectiveness and efficiency.
Question 6. To obtain evidence that no duplicate payments of accounts payable are made, an internal auditor would examine:
a. Purchase orders for proper approval.
b. Receiving documents to see whether goods were received
c. Approved vendor price lists to see whether the company paid the proper amount.
d. Supporting documentation for cancellation when the check is written to the vendor.
Question 7. Directors may use a tool called risk analysis in preparing work schedules. Which of the following would not be considered in performing a risk analysis?
a. Financial exposure and potential loss.
b. Skills available on the audit staff.
c. Results of prior audits.
d. Major operating changes.
Question 8. Which of the following audit objectives would be accomplished by tracing a sample of accounts receivable debit entries to customer invoices and related shipping documents?
a. Sales are properly recorded.
b. Sales are billed at the correct prices.
c. Accounts receivable represent valid sales.
d. Customer credit is approved.
Question 9. An activity appropriately performed by the internal auditing department is:
a. Designing systems of control.
b. Crafting procedures for systems of control.
c. Reviewing systems of control before implementation.
d. Installing systems or control.
Question 10. Which of the following measures would be most appropriate for an auditor to use in an audit of the efficiency of a motor vehicle inspection facility?
a. The number of cars inspected per hour.
b. The ratio of cars rejected to total cars inspected.
c. The number of cars inspected per inspection agent.
d. The average amount of fees collected per cashier.