Question 1

Which of the following actions best demonstrates that an internal auditor is exercising due professional care?

Options :

A : The auditor performs thorough reviews and provides absolute assurance of regulatory compliance.

B : The auditor is alert to the possibility of fraud and activities where irregularities are most likely to occur.

C : The auditor recommends improvements for all of the organization-s procedures and practices.

D : The auditor is cognizant of reducing travel expenses by combining a personal vacation with a business trip.

Answer: B

Question 2

According to the Standards, which of the following best describes why initial audit test results should be reported to the auditor-in-charge prior to advising management?

Options :

A : It increases the likelihood of obtaining the audit client-s agreement with the results.

B : It ensures that an appropriate chain of evidence is maintained through the workpapers.

C : It helps ensure that appropriate professional judgments and conclusions are made.

D : It is required to demonstrate that effective engagement supervision has occurred.

Answer: C

Question 3

Non-statistical sampling does not require which of the following?

Options :

A : The sample to be representative of the population.

B : The sample to be selected haphazardly.

C : A smaller sample size than if selected using statistical sampling.

D : Projecting the results to the population.

Answer: C

Question 4

An internal audit charter, approved by the board, restricts the internal audit activity to providing assurance only on the reliability of financial information and the effectiveness of internal accounting controls. Which of the following statements is true regarding the extent to which the external auditor may rely on the internal audit activity's work?

Options :

A : The external auditor may make full use of the work, as the audit charter is very specific as to the work the internal audit activity may undertake.

B : The external auditor may use the work, as the board has approved the charter, thus taking responsibility for any deficiencies.

C : The external auditor must disregard the work, as the scope of the charter may introduce bias and result in a lack of due professional care.

D : The external auditor may use the work with caution, due to the internal audit activity-s scope and responsibility restrictions.

Answer: D

Question 5

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?

Options :

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: D