NEW QUESTION 1
Which of the following would be considered a violation of The IIA's mandatory guidance on independence?

• A. The chief audit executive (CAE) reports functionally to the board and administratively to the chief financial officer.
• B. The board seeks senior management's recommendation before approving the annual salary adjustment of the CAE.
• C. The CAE confirms to the board, at least once every five years, the organizational independence of the internal audit activity.
• D. The CAE updates the internal audit charter and presents it to the board for approval periodically, not on a specific timeline.

Answer: B

NEW QUESTION 2
In which of the following scenarios would the chief audit executive (CAE) be required to decline the assignment?

• A. The CAE would need to procure external services to deliver the internal audit assurance program.
• B. There is no expertise within the internal audit team for detecting and investigating fraud.
• C. There is no expertise within the internal audit team for auditing an IT engagement.
• D. There is no available expertise on the internal audit team to perform a consulting engagement.

Answer: B

NEW QUESTION 3
According to The IIA's Code of Ethics, which of the following actions violates the principle of confidentiality?

• A. Accepting a consulting request in the IT department without possessing the requisite experience.
• B. Providing personal tax preparation services for a fee for several employees during the lunch hour.
• C. Providing a friend with the marketing strategic plan, which she will use to prepare her university thesis.
• D. Agreeing to reword an observation to avoid the client complaining directly to the auditor's supervisor.

Answer: C

NEW QUESTION 4
Which of the following statements describes impairment to the internal auditor's objectivity?

• A. An internal auditor reviews a purchasing agent's contract drafts prior to their execution.
• B. An internal auditor reduces the scope of an audit engagement due to budget restrictions.
• C. An internal auditor receives a promotional gift that is available to the organization's employees.
• D. An internal auditor performs an assessment of the operations for which he was recently responsible.

Answer: D

NEW QUESTION 5
While performing an accounts payable engagement, a senior auditor wants to conduct several tests of controls for travel expenses. Which of the following actions are most appropriate for the senior auditor to undertake?
* 1. Ensure all tests use a random sampling technique.
* 2. Consider a judgmental approach for the sample size.
* 3. Assess testing errors through root cause analysis.
* 4. Ensure that the entire data set is tested.

• A. 1 and 2.
• B. 1 and 3.
• C. 2 and 3.
• D. 2 and 4.

Answer: C

NEW QUESTION 6
Which of the following scenarios best illustrates a rationalization as the root cause of potential fraud?

• A. Managers who have been with the organization for several decades become aware that newly hired, younger managers are being moved more quickly into senior positions.
• B. The controller at a nationwide manufacturing company recently opted to no longer require two-week mandatory vacations for accounting staff.
• C. Security cameras that monitor cash handling at the register are not functioning.
• D. The organization is slowly phasing out three mature products that produce the highest commissions for the sales staff.

Answer: B

NEW QUESTION 7
While auditing an organization's credit approval process, an internal auditor learns that the organization has made a large loan to another auditor's relative. Which course of action should the auditor take?

• A. Proceed with the audit engagement, but do not include the relative's information.
• B. Have the chief audit executive and management determine whether the auditor should continue with the audit engagement.
• C. Disclose in the engagement final communication that the relative is a customer.
• D. Immediately withdraw from the audit engagement.

Answer: B

NEW QUESTION 8
Which of the following best explains why integrity is a necessary personal quality for internal auditors at all levels?

• A. Internal auditor integrity enables stakeholders to constantly question the work of the internal audit activity.
• B. Internal auditor integrity enables the internal auditor to avoid being challenged by any party in the organization.
• C. Internal auditor integrity enables the internal audit activity to be able to demonstrate independence.
• D. Internal auditor integrity enables users of internal auditors' work to make important business decisions.

Answer: D

NEW QUESTION 9
A medical insurance provider uses an electronic claims-submission process and suspects that a number of physicians have submitted claims for treatments that were not performed. Which of the following control procedures would be most effective to detect this type of fraud?

• A. Require the physician to submit a signed statement attesting that the treatments had been performed.
• B. Send confirmations to the physicians, requesting them to verify the exact nature of the claims submitted to the insurance provider.
• C. Develop an integrated test facility and submit false claims to verify that the system is detecting such claims on a consistent basis.
• D. Use computer software to identify abnormal claims based on the insured's age and medical history.

Answer: D

NEW QUESTION 10
Which of the following is an example of a directive control?

• A. Segregation of duties.
• B. Exception reports.
• C. Incentive compensation plans.
• D. Automated reconciliations.

Answer: C

NEW QUESTION 11
According to The MA Code of Ethics, which of the following is one of the rules of conduct for objectivity?

• A. Internal auditors shall continually improve their proficiency and effectiveness and quality of their services.
• B. Internal auditors shall respect and contribute to legitimate and ethical objectives of the organization.
• C. Internal auditors shall not accept anything that may impair or be presumed to impair their professional judgment.
• D. Internal auditors shall be prudent in the use and protection of information acquired in the course of their duties.

Answer: C

NEW QUESTION 12
An internal auditor is reviewing the accounts receivable when she discovers account balances more than three years old. The auditor was previously supervising the area during this time, and she subsequently advises the chief audit executive (CAE) of a potential conflict.
Which of the following is the most appropriate course of action for the CAE to take?

• A. Replace the auditor with another audit staff member.
• B. Continue with the present auditor, as more than one year has passed.
• C. Withdraw the audit team and outsource the financial audit of the division.
• D. Work with the division's management to resolve the situation.

Answer: A

NEW QUESTION 13
An internal auditor uses a predefined macro provided in a popular spreadsheet application to verify the present value of the organization's investments. Which of the following is the most appropriate course of action regarding the auditor's use of this functionality?

• A. The auditor should accept the calculations generated by the function, as any further work or documentation would be inefficient.
• B. The auditor should perform a manual recalculation of several results to validate and document the results.
• C. The auditor should review the programming of the macro before its use to ensure that it is appropriate for the required calculations.
• D. The auditor should tabulate the results in the spreadsheet to ensure the macro has generated the correct results for all calculations.

Answer: B

NEW QUESTION 14
Which two of the following are preventive controls in a check disbursement process?
* 1. Daily reconciliation of the bank account used for check disbursements and prompt follow-up of un-reconciled items.
* 2. Segregation of the following duties: establishing new vendors, approving checks, and reconciling the bank account.
* 3. An activity report detailing who accesses the check disbursement system and the nature of any action taken in the system.
* 4. Evidence of strong access controls ensuring that authorized individuals have access only to the functions related to their responsibilities.

• A. 1 and 3.
• B. 1 and 4.
• C. 2 and 3.
• D. 2 and 4.

Answer: D

NEW QUESTION 15
An organization has implemented a software system that requires a supervisor to approve transactions that would cause treasury dealers to exceed their authorized limit. This is an example of which of the following types of controls?

• A. Preventive controls.
• B. Detective controls.
• C. Soft controls.
• D. Directive controls.

Answer: A

NEW QUESTION 16
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