Question 1

If an engagement client disputes that a specific action or process is within the scope of the internal audit activity, what would be the most appropriate way for the internal audit activity (IAA) to respond?

Options :

A : Terminate the audit engagement in full because an operational audit will not be productive without the client-s cooperation.

B : Terminate only the specific action or process with which the client disagrees and work to determine a substitute function that will not impede further IAA or the client-audit relationship.

C : Refer the client to the IAA-s charter and the approved yearly audit plan, which includes the areas designated for audit in the current time period

D : Seek the approval of senior management or the board in mediation, allowing an overseer to clarify the scope of the audit engagement for the client.

Answer: C

Question 2

In an assurance engagement of treasury operations, an internal auditor is required to consider all of the following issues except:

Options :

A : The audit committee has requested assurance on the treasury department-s compliance with a new policy on the use of financial instruments.

B : Treasury management has not instituted any risk management policies.

C : Due to the recent sale of a division, the amount of cash and marketable securities managed by the treasury department has increased by 350 percent.

D : The external auditors have indicated some difficulties in obtaining account confirmations.

Answer: D

Question 3

During fieldwork, an internal auditor located a significant internal control issue. Without identifying the origins of the issue, the auditor concluded the engagement and included the issue in the final audit report. To enhance audit quality, which of the following skills should the internal auditor improve?

Options :

A : Business acumen.

B : Critical thinking.

C : Communication.

D : Audit report writing.

Answer: B

Question 4

Which of the following characteristics could indicate high risk?

Options :

A : Management decisions are made by a committee of mid to higher level management personnel.

B : The company is not in a rapidly growing industry.

C : The company-s profitability is lower than the industry norm.

D : Management turnover has been very low.

Answer: C

Question 5

Which of the following is not an appropriate control related to sales in a manufacturing company?

Options :

A : Customers' orders are recorded promptly.

B : Goods shipped are matched with valid customer orders.

C : Goods returned are inspected for damage by the sales department and then entered into inventory.

D : Credit department approval is required for credit sales transactions.

Answer: C