The Standards are applicable across all industries and types of internal audit organizations. Answer ExplanationsAnswer (a) is the correct answer. Answer ExplanationsAnswer (a) is incorrect. It could cause a conflict of the type described and would be considered a discreditable act (Article III). It defines the purpose of the review of the quality of performance.Answer (d) is incorrect. Answer ExplanationsAnswer (a) is the correct answer. However, the new director of internal audit would have free access to the controller to report anything important. This response conforms with the IIA Standards.Answer (d) is incorrect. Article VIII prohibits auditors from using audit information for personal gain.Answer (c) is incorrect. This could taint the directors objectivity and promote unethical behavior. Because of the corrective action, the internal auditor did not inform management. The directors objective is toAnswersA: Determine if audit work in this area could not be performed exclusively by internal auditing.B: Coordinate the pension audit so as to fulfill the scope of work and not duplicate work of the independent outside auditor.C: Ascertain which account balances have been tested by the independent outside auditor so that internal auditing may test the internal controls to determine the reliability of these balances.D: Determine whether the independent outside auditors audit techniques, methods, and terminology should be used by internal auditing in this area to conform with past audit work or if the independent outside auditor should use techniques consistent with other internal auditors. It would be an appropriate response.Answer (c) is incorrect. The facts belie an indication of fraud.Answer (d) is incorrect. Also, the drafting of procedures for systems is not an audit function. Significant audit findings should be timely communicated.Answer (d) is incorrect. The focus on economy and efficiency audits was new, but the auditees seemed very happy.2. Assist the external auditor to reduce external audit fees. A code of conduct may help to establish minimum standards of competence, but it would be impossible to legislate equality of competence by all members of a profession.Answer (c) is the correct answer. However, approval of goals is not mentioned in this portion of the Standards.Answer (c) is incorrect. Question: V1C1-0011An internal audit team recently completed an audit of the companys compliance with its lease-versus-purchase policyconcerning company automobiles. It clearly violates the IIAs Code, Article IV, but statement II is also correct.Answer (b) is incorrect. It is a requirement.Answer (b) is incorrect. Principle Internal auditors respect the value and ownership of information they receive and do not disclose information without appropriate authority unless there is a legal or professional obligation to do so. 1 / 50 Flashcards Learn Test Match Created by Vespervich Terms in this set (50) The proper organizational role of internal auditing is to A. Supervision should also be extended to training, time reporting, and expense control, as well as similar administrative matters.III. It is suggested by the Standards.Answer (c) is the correct answer. This evidence demonstrates efficiency by referencing work already done in another section of the working papers. Since the internal auditing department has no engineering expertise, there is no basis from which to judge the accuracy of the superintendents statements.Answer (d) is incorrect. Considering Actions 2, 3, and 4 that were taken, which would be considered a violation of the IIA Standards?AnswersA: Actions 2, 3, and 4.B: Action 4 only.C: Action 2 and 3 only.D: None of the actions. The CIA violated the law and performed an act discreditable to the profession.Answer (c) is incorrect. The level of formal education will vary according to position requirements or departmental needs.Answer (b) is incorrect. The Standards do not require such action.Answer (c) is the correct answer. She has not engaged in continuing professional education or other activities to improve her effectiveness during the last three years. Answer ExplanationsAnswer (a) is the correct answer. The Standards provide that the extent of supervision should vary with the proficiency of the auditor. Since the books were adjusted, it would be expected that the external auditor would inquire as to the nature of the adjustment. The director shouldAnswersA: Provide the activity reports to senior management as requested and discuss any issues that may require action to be taken.B: Not provide activity reports to senior management because such matters are the sole province of the board.C: Disclose only those matters in the activity reports to the board that pertain to expenditures and financial budgets of the internal auditing department.D: Provide information to senior management that pertains only to completed audits and findings available in published audit reports. Standard operating procedures are an appropriate source.Answer (b) is incorrect. Question: V1C1-0241A company with a whistle-blowing hotline has received an anonymous tip that three senior internal auditors are in violation of the IIA Code of Ethics. Question: V1C1-0197A Certified Internal Auditor is found to have committed a very serious violation of the Code of Ethics of the IIA.Which of the following describes the disciplinary action most likely to be imposed by the Institute? The information may be useful in a subsequent audit in the marketing area.Answer (b) is incorrect. With rare exceptions, the list is determined during the preliminary survey. The action may represent a violation of the Code of Ethics for both of the reasons given.Answer (d) is incorrect. The audit committee may ask for the full audit report. When internal auditors are assigned to assist in the external audit, they are allowed to share relevant information with the external auditors.Answer (d) is incorrect. *Available in 40 languages Public Access This content is public access, enjoy. To report only those audit exceptions in favor of XYZ would inflate the amount due XYZ by the credits due ABC (Code of Ethics, Article II).Answer (b) is incorrect. This is a broad definition of due diligence reviews per the IIAs Standards. The Institute's Code of Ethics extends beyond the definition of internal auditing to include two essential components: The Code of Ethics together with The Institute's Professional Practices Framework and other relevant Institute pronouncements provide guidance to internal auditors serving others. There is no specific requirement for this.Answer (c) is incorrect. Answer ExplanationsAnswer (a) is incorrect. It is included as a factor in the Standards.Answer (d) is the correct answer. The Code of Ethics, which requires internal auditors to document company policy. Answer ExplanationsAnswer (a) is the correct answer. Standards, measures, or expectations represent the criteria for the audit findings. This involves detection, not deterrence.Answer (b) is incorrect. It is not the best answer. Theintent of the Standards is to ensure that internal auditors maintain their technical competence.Answer (b) is the correct answer. As long as the auditor refrained from performing operating functions such as designing or installing operating systems or drafting detailed control procedures, the auditors objectivity would not be compromised. Audit reports should be reviewed by director or designee prior to distribution. Journal entries for the last six months since the staff reductions show increasing numbers of prior month adjustments and corrections, including revenues, cost of sales, and accruals that had been misstated or forgotten during month-end closing activity. This is how the responsibility is met according to the Standards. The new director is not a member of the IIA and is not a CIA. That would ensure employee acceptance of the code; that is not an issue here.Answer (c) is incorrect. It is your responsibility as internal audit director to maintain security of the working papers and coordinate efforts with external auditors.Answer (c) is incorrect. It is achieved through organizational status and objectivity. Furthermore, the Standards state: Designing, installing, and operating systems are not audit functions. Both internal and external auditors are required to be objective.Answer (c) is incorrect. The IIA Standards say that persons transferred to the internal auditing department should not be assigned to audit those activities they previously performed until a reasonable period of time has elapsed.Answer (c) is incorrect. The audits focused solely on cost savings, and each audit report highlighted potential costs to be saved. It also includes training, employee performance evaluations, time and expense control, and similar administrative areas. Guiding the ethical conduct of internal auditors is the purpose of the Code of Ethics, not the Standards. If the disagreement is ultimately resolved, there will be no reason to report the previous disagreement. Shall perform their work with honesty, diligence, and responsibility. Question: V1C1-0157According to the IIA Standards, internal auditors should possess all of the following except:AnswersA: Proficiency in applying internal audit standards.B: An understanding of management principles.C: The ability to exercise good interpersonal relations.D: The ability to conduct training sessions in quantitative methods. Reporting should occur sooner. Fraternization might be discouraged.Answer (c) is incorrect. The Standard states that budget restrictions do not constitute a violation of an auditors independence.Answer (c) is incorrect. However, she feels she is performing the same quality work she always has.D: John discovered an internal financial fraud during the year. It is not the best choice.Answer (d) is incorrect. A scope limitation would not necessarily cause the need for more frequent audits.Answer (d) is incorrect. The violation is not serious enough to warrant the maximum disciplinary action. CIAs must not knowingly be a party to any illegal or improper act. Each one is an objective under the Standards.Answer (c) is incorrect. Designing, installing, and operating systems are not audit functions. Both positions in the answer should be reported, and the reasons for the disagreement should be identified. Underutilization of facilities relates to efficiency of operation. Shall not knowingly be a party to any illegal activity, or engage in acts that are discreditable to the profession of internal auditing or to the organization. Question: V1C1-0078An internal audit of sales contracts revealed that a bribe had been paid to secure a major contract. Generally, there should be no prohibition from public service. This is acceptable as long as the auditor is careful not to state any final conclusions that are not supported by factual evidence.Answer (d) is incorrect. The Statement of Responsibilities of Internal Auditing does not address working papers.Answer (d) is incorrect. Such a report provides information forAnswersA: Quality of performance in relation to the companys travel policy.B: Identifying costs necessary to process employee business expense report data.C: Departmental budget-to-actual comparisons.D: Supporting employers business expense deductions. Answer ExplanationsAnswer (a) is incorrect per the Code of Ethics.Answer (b) is the correct answer. Reference to Code of Ethics, sections IV and V.Answer (c) is incorrect per the Code of Ethics.Answer (d) is incorrect per the Code of Ethics. Board of Directors c. Corporate Controller b. Assume that the internal audit director received an annual bonus as part of that individuals compensation package. A Code of Ethics sets forth professional values and ethical principles. The chief executive officer (CEO) qualifies as one of those higher-level members in the organization who may receive only a summary report. Like the audit committee, the CEO can request the full audit report. Question: V1C1-0049Reporting to senior management and the board is an important part of the auditors obligation. John discussed the fraud with the external auditor when the external auditor reviewed working papers detailing the incident. This committee is a recipient of the reports.Answer (c) is incorrect. This assertion is self-serving.Answer (b) is incorrect. The Code of Ethics calls for compliance with the Standards, which charge the director with coordination with external auditors and exchanging information. Question: V1C1-0135The IIA Standards indicate that independence permits internal auditors to render the impartial and unbiased judgments essential to the proper conduct of audits. Question: V1C1-0183You are the internal audit director of a parent company that has foreign subsidiaries. This is covered in the departments charter.Answer (c) is incorrect. The Standards prescribe highlighting significant audit findings and recommendations and reporting on the approved audit work schedule.Answer (c) is the correct answer. Answer ExplanationsAnswer (a) is the correct answer. Internal auditors: Internal auditors apply the knowledge, skills, and experience needed in the performance of internal auditing services. Shall observe the law and make disclosures expected by the law and the profession. The shortage and related causes are of sufficient magnitude to impact the external auditors report. Answer ExplanationsAnswer (a) is incorrect. Which of the following actions would be considered inconsistent with the IIAs Code of Ethics and Standards?AnswersA: Assure the employee that you can maintain her anonymity and listen to the information.B: Suggest the person consider talking to legal counsel.C: Inform the individual that you will attempt to keep the source of the information confidential and will look into the matter further.D: Inform the employee of other methods of communicating this type of information. Principles that are relevant to the profession and practice of internal auditing. Both positions should be reported, and the reasons for the disagreement should be identified.Answer (d) is incorrect. Which would be the best course of action for the auditor in these circumstances?AnswersA: Determine whether the number of tires purchased can be reconciled to maintenance records.B: Count the number of tires on hand and trace them to the related receiving reports.C: Select a judgmental sample of requisitions and verify that the fleet manager signs each one.D: Compare the number of tires purchased under the blanket purchase order with the number of tires purchased in the prior year for reasonableness. The audit program is a guide, but it does not restrict the auditor from pursuing information unknown at the time that the program was written.Answer (c) is incorrect. Answer ExplanationsAnswer (a) is incorrect. ABC is the operating partner of this joint venture with XYZ. Question: V1C1-0072According to the IIA Standards, which of the following best describes the nature of opinions that are appropriate for internal audit reports?AnswersA: Opinions are generally the auditors subjective judgments concerning why deficiencies exist.B: Opinions are the auditors evaluations of the effects of the findings on the activities reviewed.C: Opinions are conclusions that the auditor has reached concerning the appropriateness of the auditees objectives.D: Opinions should only involve the fairness of the auditees financial statements. 2.3 Shall disclose all material facts known to them that, if not disclosed, may distort the reporting of activities under review. This would be a violation of Article X of the Code, which requires auditors to continually strive for improvement in their proficiency and the effectiveness of their audits.Answer (d) is incorrect. Reversed.Answer (b) is incorrect. The IIA Standards require that goals be capable of accomplishment within given plans and budgets and that they be measurable.Answer (b) is incorrect. If the officer makes good on the promise, the internal auditorAnswersA: Can ignore the original charging of the nonbusiness expenses.B: Should inform the tax authorities in any event.C: Should still include the finding in the audit report.D: Should recommend that the officer forfeit any frequent flyer miles received as part of the questionable travel. The industry defect rate is 3%.Which paragraph would be characterized as the attribute described in the IIA Standards as Condition?AnswersA: 1B: 2C: 3D: 4, Answer ExplanationsAnswer (a) is incorrect. Answer ExplanationsAnswer (a) is incorrect. Consequently, this would not impair the auditors objectivity.Answer (d) is the correct answer. Question: V1C1-0207An auditor discovers some material inefficiency in a purchasing function. Answer ExplanationsAnswer (a) is incorrect. If the auditor determines such criteria are inadequate or nonexistent, which of the following actions would be appropriate?I. Competent information is reliable and the best available through the use of\ appropriate audit techniques. 2. Answer ExplanationsAnswer (a) is incorrect. This is not included in the provisions of the Standards.Answer (c) is incorrect. The Standards state that follow-up work is not managements responsibility.Answer (d) is incorrect. The Standard states that an auditor may participate on a task force that recommends new systems.
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