IIA-CIA-PART2 Online Practice Questions and Answers

The following is an excerpt from an audit engagement workpaper: A Company Accounts Receivable Date

Objective. To determine if the computer system is correctly recording all accounts receivable transactions.

Procedures: Judgmental selection of a sample of all accounts receivable balances greater than $50,000 for positive confirmation of balances.

Conclusion: Based on the results of testing wherein all but three confirmations were returned, the accounts receivable balance is fairly presented in all material respects.

Which of the following is true regarding the workpaper?

A. It is not appropriate to judgmentally select a sample when testing accounts receivable.

B. A conclusion should be reached only for the results of overall testing, not for individual procedures.

C. The audit procedures used are not consistent with the audit objective.

D. The format of the workpaper does not conform to the standard format for workpapers.

Which of the following would not be characteristic of control self-assessment implemented by an audit department?

A. An auditor usually facilitates the discussion during the workshop phase while another records comments for subsequent use.

B. Auditors and business-unit employees work as a team.

C. Auditors perform traditional audit tests to identify control weaknesses.

D. Participants discuss the control weaknesses that hinder the achievement of objectives.

Which of the following best defines an audit opinion?

A. A summary of the significant audit observations and recommendations.

B. An auditor's evaluation of the effects of the observations and recommendations on the activities reviewed.

C. A conclusion which must be included in the audit report.

D. A recommendation for corrective action.

Which of the following would have the least impact (either positive or negative) on an assessment of a department's control environment?

A. The department managed long-term investments, including investment in derivatives and other financial instruments, to maximize return.

B. The department manager sets a tone of honesty and integrity in all business dealings and this tone is emulated by department personnel.

C. Many department functions were duplicated or verified by other department employees as part of the department's normal procedures.

D. Audit tests designed to verify compliance with control procedures detected a general failure to follow standard procedures for transaction authorization.

During a payroll audit of a large organization, an internal auditor noted that the assistant personnel director is responsible for many aspects of the computerized payroll system, including adding new employees in the system; entering direct- deposit information for employees; approving and entering all payroll changes; and providing training for system users. After discussions with the director of personnel, the auditor concluded that the director was not comfortable dealing with information technology issues and felt obliged to support all actions taken by the assistant director. The auditor should:

A. Continue to follow the engagement program because the engagement scope and objectives have already been discussed with management.

B. Review the engagement program to ensure testing of direct deposits to employee bank accounts is adequately covered.

C. Recommend to the chief audit executive that a fraud investigation be started.

D. Test a sample of payroll changes to ensure that they were approved by the assistant director before being processed.

The chief audit executive (CAE) of a new organization is in the process of determining the manner in which audit reports will be distributed and to whom. According to the Standards, which of the following is the most appropriate course of action for the CAE to take to develop this distribution process?

A. The process should be determined in meetings with the external auditor and senior management to ensure alignment with external reporting.

B. The CAE should meet with senior management for their input, but finalize the distribution of all reports with the board.

C. The CAE should independently implement the report distribution, using best judgment to ensure that all relevant stakeholders are informed.

D. The CAE should request that senior management and the board meet to determine the most appropriate reporting method.

An internal auditor is asked to determine why the production line for a large manufacturing organization has be experiencing shutdowns due to unavailable parts. The auditor learns that production data used for generating automatic purchases via electronic interchange is collected on personal computers connected by a local area network (LAN). Purchases are made from authorized vendors based on both the production plans for the next month and an authorized materials requirements plan (MRP) that identifies the parts needed per unit of production. The auditor suspects the shutdowns are occurring because purchasing requirements have not been updated for changes in production techniques. Which of the following audit procedures should be used to test the auditor's theory?

A. Compare purchase orders generated from test data input into the LAN with purchase orders generated from production data for the most recent period.

B. Develop a report of excess inventory and compare the inventory with current production volume.

C. Compare the parts needed based on current production estimates and the MRP for the revised production techniques with the purchase orders generated from the system for the same period.

D. Select a sample of production estimates and MRPs for several periods and trace them into the system to determine that input is accurate.

Which of the following is most likely to be judged as a significant residual risk that would exceed the organization's acceptable risk level?

A. Any risk involving organizational expansion into a new geographical area with an unstable political environment.

B. Any risk involving investments into bitcoin and suspicious derivatives.

C. Any risk that can cause material or financial loss.

D. Any risk that could cause injuries or pollute the environment.