1. When an internal auditor is interviewing to gain information, (s)he will not be able to remember everything that was said in the interview. The most effective way to record interview information for later use is to
A. Organize notes around topics on the interview plan and note responses in the appropriate area, reviewing the notes after the meeting to make additions.
B. Write notes quickly, trying to write down everything in detail as it is said; then highlight important points after the meeting.
C. Electronically record the interview to capture everything that everyone says; then type everything said into a computer for documentation.
D. Hire a professional secretary to take notes, allowing complete concentration on the interview; then delete unimportant points after the meeting.
2. In planning an engagement, the internal auditor establishes objectives to address the risk associated with the activity. Risk is the
A. Failure to adhere to organizational policies, plans, and procedures or to comply with relevant laws and regulations.
B. Failure to accomplish established objectives and goals for operations or programs.
C. Uncertainty of the occurrence of an event that could affect the achievement of objectives.
D. Possibility that the balance or class of transactions and related assertions contains misstatements that could be material to the financial statements.
3. An organization provides credit cards to selected employees for business use. The credit card company provides a computer file of all transactions by employees of the organization. An auditor plans to use generalized audit software (GAS) to select relevant transactions for testing. Which of the following would not be readily identified using GAS?
A. High-monetary-amount transactions.
B. Suppliers used by each cardholder.
C. Fraudulent transactions.
D. Transactions for specific cardholders.
4. Which of the following procedures is the least effective in gathering information about the nature of the processing and potential problems?
A. Distribute a questionnaire to gain a greater understanding of the responsibilities for claims processing and the control procedures utilized.
B. Send an email message to all clerical personnel detailing the alleged problems and request them to respond.
C. Interview selected clerical employees in the claims department to find out more about the procedures used, and the rationale for the procedures, and obtain their observations about the nature and efficiency of processing.
D. Interview supervisors in the claims department to find out more about the procedures used, and the rationale for the procedures, and obtain their observations about the nature and efficiency of processing.
5. An internal auditor must weigh the cost of an engagement procedure against the persuasiveness of the evidence to be gathered. Observation is one engagement procedure that involves cost-benefit trade-offs. Which of the following statements regarding observation as an engagement technique is (are) true?
1. Observation is limited because individuals may react differently when being observed.
2. When testing financial statement balances, observation is more persuasive for the completeness assertion than it is for the existence assertion.
3. Observation is effective in providing information about how the organization's processes differ from those specified by written policies.
A. 1 only.
B. 1 and 3 only.
C. 1, 2, and 3.
D. 2 only.
6. Checklists used to assess risk have been criticized for all of the following reasons except
A.Providing a false sense of security that all relevant factors are addressed.
B.Being incapable of translating the experience or sound reasoning intended to be captured by each item on the checklist.
C.Decreasing the uniformity of data acquisition.
D.Inappropriately implying equal weight to each item on the checklist.
7. Which of the following techniques is most likely to result in sufficient information with regard to an engagement to review the quantity of fixed assets on hand in a particular department?
A. Interviews with department management.
B. Examination of the account balances contained in general and subsidiary ledgers.
C. Physical observation.
D. Analytical review of purchase requests and subsequent invoices.
8. Internal auditors should be active listeners to gain the most information in an internal audit interview. Which of the following best describes how an active listener behaves in an interview? The listener
A. Avoids looking directly at the speaker and interrupting his or her train of thought.
B. Judges and evaluates the information as it is presented.
C. Formulates arguments and conclusions as pieces of the speaker's information fit together.
D. Listens with acceptance, empathy, and intensity.
9. The internal auditor wants to understand the actual flow of data regarding cash processing. The most convincing information is obtained by
A. Interviewing the chief financial officer.
B. Performing a walk-through of the processing and obtaining copies of all documents used.
C. Reviewing the systems flowchart.
D. Reviewing the programming flowchart for information about control procedures placed into the computer programs.
10. When an auditor performs tests on a computerized inventory file containing over 20,000 line items, that auditor can maintain independence and perform most efficiently by
A. Asking the console operator to print every item that costs more than US $100.
B. Obtaining a printout of the entire file and then selecting each nth item.
C. Using a generalized audit software package.
D. Using the systems department's programmer to write an extraction program.
11. During an operational audit engagement, an auditor compared the inventory turnover rate of a subsidiary with established industry standards in order to
A. Determine compliance with corporate procedures regarding inventory levels.
B. Test controls designed to safeguard assets.
C. Evaluate the accuracy of internal financial reports.
D. Assess performance and indicate where additional audit work may be needed.
12. The chief audit executive was reviewing recent reports that had recommended additional engagements because of risk exposures to the organization. Which of the following represents the greatest risk and should be the next assignment?
A. Three prenumbered receiving reports were missing.
B. Several times cash receipts had been held over an extra day before depositing.
C. Payment had been made for routine inventory items without a purchase order or receiving report.
D. There were several purchase orders issued without purchase requisitions.