Question 1

Which of the following is an inherent limitation of internal control?

Options :

A : Segregation of duties.

B : Employee evaluation.

C : Judgmental sampling.

D : Collusion.

Answer: D

Question 2

An important difference between a statistical and a judgmental sample is that with a statistical sample,

Options :

A : D.Population estimates with measurable reliability can be made.

B : C.More accurate results are obtained.

C : B.A smaller sample can be used.

D : A.No judgment is required because everything is computed according to a formula.

Answer: A

Question 3

When evaluating the independence of an internal audit activity, a quality assurance review team performing an external assessment considers several factors. Which of the following factors has the least amount of influence when judging an internal audit activity’s independence?

Options :

A : Impartial and unbiased judgments.

B : The extent of internal auditor training in communications skills.

C : Criteria used in making internal auditors’ assignments.

D : Relationship between engagement records and engagement communications.

Answer: B

Question 4

Reliable evidence is best defined as evidence that

Options :

A : Is the best attainable.

B : Proves an intermediate fact, or group of facts, from which still other facts can be inferred.

C : Is supplementary to other evidence already gathered and tends to strengthen or confirm it.

D : Is obtained by observing people, property, and events.

Answer: A

Question 5

A chief audit executive (CAE) used an electronic spreadsheet to facilitate the risk assessment process for a number of different divisions. The spreadsheet included the following factors Complexity of operations Competence of divisional personnel Dollar amount of accounts where management's judgment can affect the expense. The CAE used a group meeting of audit managers to reach a consensus on the competence of divisional personnel. Other factors were assessed as high, medium, or low risk by either the CAE or an audit manager who had audited the division. The CAE weighted each factor and computed a composite risk score. Which of the following statements is correct regarding this risk assessment process?

Options :

A : The risk analysis would not be appropriate because it mixes both quantitative and qualitative factors.

B : Assessing factors at discrete levels, such as high, medium, and low, is inappropriate for the risk assessment process because the ratings are not quantifiable.

C : The weighting is subjective and should have been determined through a process such as multiple regression analysis.

D : Using a subjective group consensus to assess personnel competence is appropriae.

Answer: D