Question 1

When forming an opinion on the adequacy of management's systems of internal control, which of the following findings would provide the most reliable assurance to the chief audit executive?

* During an audit of the hiring process in a law firm, it was discovered that potential employees' credentials were not always confirmed sufficiently. This process remained unchanged at the following audit.

* During an audit of the accounts payable department, auditors calculated that two percent of accounts were paid past due. This condition persisted at a follow up audit.

* During an audit of the vehicle fleet of a rental agency, it was determined that at any given time, eight percent of the vehicles were not operational. During the next audit, this figure had increased.

* During an audit of the cash handling process in a casino, internal audit discovered control deficiencies in the transfer process between the slot machines and the cash counting are

a. It was corrected immediately.

Options :

A : 1 and 3 only

B : 1 and 4 only

C : 2 and 3 only

D : 2 and 4 only

Answer: B

Question 2

Which of the following combinations of conditions is most likely a red flag for fraud?

Options :

A : The practice of surprise audits and the implementation of an employee support program.

B : Hiring an employee with a prior fraud conviction and yearly management review.

C : Occasional accounting department overrides and discontinuation of the anonymous fraud hotline due to infrequent use.

D : A veteran employee in upper management experiencing financial difficulties and recently implemented enhanced controls.

Answer: C

Question 3

Which of the following is useful for forecasting the required level of inventory?

1. Statistical modeling.

2. Information about seasonal variations in demand.

3. Knowledge of the behavior of different business cycles.

4. Pricing models linked to seasonal demand.

Options :

A : 1 and 2 only

B : 2 and 3 only

C : 1, 2, and 3 only

D : 1, 2, 3, and 4

Answer: C

Question 4

Which of the following is a major advantage of decentralized organizations, compared to centralized organizations?

Options :

A : Decentralized organizations are more focused on organizational goals.

B : Decentralized organizations streamline organizational structure.

C : Decentralized organizations tend to be less expensive to operate.

D : Decentralized organizations tend to be more responsive to market changes.

Answer: D

Question 5

An organization is considering mirroring the customer data for one regional center at another center. A disadvantage of such an arrangement would be:

Options :

A : Lack of awareness of the state of processing.

B : Increased cost and complexity of network traffic.

C : Interference of the mirrored data with the original source data.

D : Confusion about where customer data are stored.

Answer: B

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