Certified Internal Auditor Questions + Answers Part 8
Posted: Tue Mar 01, 2022 5:00 am
QUESTION 1
Which of the following audit techniques provides for continuous monitoring and analysis of computer transactions for detailed auditing?
A. Integratedtestfacility.
B. Parallelsimul-ation.
C. Test data.
D. Embedded audit routines.
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
answer is right.
QUESTION 2
Access control software on an organization's mainframe computer records detailed information concerning both successful and unsuccessful log-on attempts to applications. Which of the following audit tools would be best suited to review the access information that has been recorded?
A. Generalizedauditsoftware. B. Flowcharting.
C. Integrated test facility.
D. Test data.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 3
Which of the following would provide the greatest assurance of the accuracy of a computer program's computation of freight charges for catalog sales?
A. Usediscoverysampling,selectingtransactionsfrominvoiceswhichshouldhavefreightchargesadded to them.
B. Useeithertestdataorparallelsimul-ationtotestthecomputerapplication.
C. Use difference estimation, selecting transactions from invoices which should have freight charges added to them.
D. Use generalized audit software to select a monetary-unit sample of invoices that have been billed to customers.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
absolute answer.
QUESTION 4
If an auditor used nonstatistical sampling instead of statistical sampling to estimate the value of inventory, which of the following would be true?
A. Theconfidencelevelcouldnotbequantified. B. Theprecisionwouldbelarger.
C. The projected value of inventory would be less reliable. D. The risk of incorrect acceptance would be higher.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
fine.
QUESTION 5
In a sampling application, the group of items about which the auditor wants to estimate some characteristic is called the.
A. Population.
B. Attributeofinterest. C. Sample.
D. Sampling unit.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
answer is perfect.
QUESTION 6
An internal auditor would most likely use attributes sampling when testing which of the following?
A. Accountsreceivablebalances.
B. Correctcodingofaccountspayabledisbursementvouchers. C. Year-endinventoryvalue.
D. Fixed asset book value.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
answer is perfect.
QUESTION 7
An audit department has received anonymous information that an employee has allegedly been able to steal and cash checks sent to the organization by customers. What is the most efficient way for an auditor to determine how this type of fraud could occur and who might be the perpetrator?
A. Confirm accounts receivable.
B. Confirm accounts payable.
C. Review the endorsements and banks of deposit on customers' canceled checks. D. Flowchart and analyze key controls in the cash receipts process.
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
Best answer.
QUESTION 8
If an auditor expects to find numerous discrepancies between recorded values and audited values of sample selections, which sampling technique would be most appropriate?
A. Attributessampling.
B. Probability-proportional-to-sizesampling. C. Difference estimation sampling.
D. Discoverysampling.
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
absolute answer.
QUESTION 9
During an audit of a retail organization, an internal auditor found a scheme in which the warehouse director and the purchasing agent diverted approximately $500,000 of goods to their own warehouse, then sold the goods to third parties. The fraud was not found earlier since the warehouse director updated the perpetual inventory records and then forwarded receiving reports to the accounts payable department for processing. Which of the following procedures would have most likely led to the discovery of the missing materials and the fraud?
A. Selectarandomsampleofreceivingreportsandtracetotherecordingintheperpetualinventory records. Note differences and investigate by type of product.
B. Selectarandomsampleofpurchaseordersandtracetoreceivingreportsandtotherecordsinthe accounts payable department.
C. Take an annual physical inventory, reconciling amounts with the perpetual inventory records. Note the pattern of differences and investigate.
D. Select a random sample of sales invoices and trace to the perpetual inventory records to see if inventory was on hand. Investigate any differences.
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
options are clearly written.
QUESTION 10
Which of the following factors would increase the confidence level in a variables sampling plan?
A. Alargersamplesize.
II. A stratified sample.
III. A larger standard deviation.
B. IandIIonly
C. I and III only
D. II and III only
E. I,II,andIII
Correct Answer: A Section: (none)
Explanation Explanation/Reference:
proper answer.
QUESTION 11
If an auditor is sampling to test compliance with a particular company policy, which of the following factors should not affect the allowable level of sampling risk?
A. Theexperienceandknowledgeoftheauditor.
B. Theadverseconsequencesofnoncompliance.
C. The acceptable level of risk of making an incorrect audit conclusion. D. The cost of performing auditing procedures on sample selections.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
exact answer.
QUESTION 12
Which of the following describes an internal auditor's responsibilities to include audit procedures to detect fraud in audits of a multinational organization?
A. InternationalAccountingStandardsrequiretheinternalauditortoincludeauditprocedureswhichwould detect fraud if it would cause a material misrepresentation of the financial statements.
B. Internalauditorsdonothaveanyspecificresponsibilitieswithrespecttoincludingfraud-relatedaudit procedures.
C. Proper audit procedures, when carried out with due professional care, will guarantee that fraud, if present, will be detected.
D. If significant control weaknesses are detected, additional tests should be directed toward other indicators of fraud.
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
genuine answer.
QUESTION 13
An appliance repair company is considering relocating the center that houses its service vehicles. An internal auditor wants to determine the potential reduction in average miles driven by the service vehicles if the center is relocated. Which of the following statistical sampling methods would be most appropriate for this test?
A. Attributessampling.
B. Discoverysampling.
C. Probability-proportional-to-size sampling. D. Mean-per-unit sampling.
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
real answer.
QUESTION 14
Monetary-unit sampling is most useful when the internal auditor:
A. Istestingtheaccountspayablebalance.
B. Cannotcumulativelyarrangethepopulationitems. C. Expects to find several material errors in the sample. D. Is concerned with overstatements.
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
rightful answer.
QUESTION 15
If management expects 100 percent compliance with a procedure, which of the following sampling approaches would be most appropriate?
A. Attributessampling. B. Discoverysampling. C. Targeted sampling. D. Variables sampling.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
answer is valid.
QUESTION 16
An internal auditor is discussing an audit problem with an engagement client. While listening to the client, the internal auditor should:
A. Preparearesponsetotheclient.
B. Takementalnotesonthespeaker'snonverbalcommunication,asitismoreimportantthanwhatis being said.
C. Make sure that all details, as well as the main ideas of the client, are remembered.
D. Integrate the incoming information from the client with information that is already known.
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 17
An auditor is using an internal control questionnaire as part of a preliminary survey. Which of the following is the best reason for the auditor to interview management regarding the questionnaire responses?
A. Interviewsprovidetheopportunitytoinsertquestionstoprobepromisingareas.
B. Interviewsarethemostefficientwaytoupgradetheinformationtothelevelofobjectiveevidence.
C. Interviewing is the least costly audit technique when a large amount of information is involved.
D. Interviewing is the only audit procedure which does not require confirmation of the information that is obtained.
Correct Answer: A Section: (none)
Explanation Explanation/Reference:
Explanation:
QUESTION 18
Many questionnaires are made up of a series of different questions that use the same response categories (for example: strongly agree, agree, neither, disagree, strongly disagree). Some designs will have different groups of respondents answer alternate versions of the questionnaire that present the questions in different orders and reverse the orientation of the endpoints of the scale (for example:
agree on the right and disagree on the left). The purpose of such questionnaire variations is to:
A. Eliminateintentionalmisrepresentations.
B. Reducetheeffectsofpatternresponsetendencies.
C. Test whether respondents are reading the questionnaire.
D. Make it possible to get information about more than one population parameter using the same questions.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 19
An auditor used a questionnaire during an interview to gather information about the nature of credit sales processing. The questionnaire did not cover some pertinent information offered by the person being interviewed, and the auditor did not document the potential problems for further investigation.
The primary deficiency with the above process is that:
A. Theauditorfailedtoconsidertheimportanceoftheinformationoffered.
B. Aquestionnairewasusedinasituationwhereastructuredinterviewshouldhavebeenused. C. Using a questionnaire precludes the auditor from documenting other information.
D. The engagement program was incomplete.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 20
The use of standard operating procedure questionnaires in audit fieldwork can be beneficial because.
A. Thesequestionnairescanbothidentifydiscrepanciesandeducateclients.
B. Standardoperatingproceduresareessentialtotheeffectivenessandefficiencyofoperations.
C. These questionnaires are more comprehensive than are other types of techniques for gathering data during fieldwork.
D. These questionnaires do not normally require prior clearance with management of the audited area.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 21
Checklists used to assess audit risk have been criticized for all of the following reasons except:
A. Providingafalsesenseofsecuritythatallrelevantfactorsareaddressed.
B. Inappropriatelyimplyingequalweighttoeachitemonthechecklist.
C. Decreasing the uniformity of data acquisition.
D. Being incapable of translating the experience or sound reasoning intended to be captured by each item on the checklist.
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
straight answer.
QUESTION 22
A limitation of using ratio analysis in an audit engagement is that it:
A. Oftenusesfinancialinformationprovidedbymanagementwhichhasnotbeenreviewedforreliability and validity.
B. Isanexpensivemethodoftesting.
C. Requires computer software in order to develop meaningful interpretations of data.
D. Is useful only when comparisons can be made across other industries.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 23
Which of the following would cause a company's accounts receivable turnover ratio to decrease steadily over a three-year period?
A. Anincreaseinthediscountofferedforearlypayment. B. Amoreliberalcreditpolicy.
C. Invoices provided on a weekly rather than a monthly basis. D. Increased cash sales.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
answer is real.
QUESTION 24
Which of the following would be the best audit procedure to use to determine if a division's unusually high sales and gross margin for November and December were the result of fraudulently recorded sales?
A. Traceasampleofshippingdocumentstorelatedsalesinvoicestoverifyproperbilling.
B. Confirmaccountsreceivablebalanceswithcustomers.
C. Compare sales and gross margin totals with those of the previous ten months and the first month of the following year.
D. Use regression analysis techniques to estimate the sales and cost of goods sold for November and December.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
satisfied with the answer.
QUESTION 25
Which of the following factors could interfere with effective problem solving by an internal auditor?
A. Reactingtopreviousexperienceswithclients. II. Focusing only on the most likely cause.
III. Correcting the symptoms of problems.
B. Ionly
C. III only
D. IandIIonly
E. I,II,andIII
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 26
A company owns a machine that will produce 100 light switches in four hours. Due to increased demand, a second machine capable of producing 100 light switches in three hours has been added.
Approximately how many hours will it take to produce 100 light switches using both machines working together?
A. 7.0 B. 3.5 C. 1.7 D. 0.58
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 27
A retail sales company has discontinued a product that normally sold for $100. During the first month of a sale of the product, a 20 percent discount was given. Later that sale price was reduced by an additional 40 percent. What was the overall discount from the original selling price?
A. 60percent. B. 52percent. C. 48 percent.
D. 30 percent.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
nice.
QUESTION 28
A recent survey indicated that residents of a small town take the train to a nearby city eight times per month, on average. The same survey showed that the number of train trips that a resident takes per month (y) is determined by the number of days per month that the resident works in the nearby city (x), according to the equation: y = 2 + 2x. A person who never works in the nearby city is expected to take the train:
A. Zerotimespermonth. B. Twotimespermonth. C. Four times per month. D. Eight times per month.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 29
A manager of one of a retailer's several retail outlets is stealing cash from cash sales, recording the sales as accounts receivable, and subsequently writing off the fictitious accounts receivable as bad debts. Which of the following comparisons would be most effective in signaling the possibility of such a fraud?
A. Baddebtexpenseasapercentageofsales,comparedtothatoftheotheroutlets. B. Baddebtexpenseasapercentageofsales,comparedtothatofpreviousyears. C. Percentage of past-due accounts receivable, compared to that of the other outlets. D. Percentage of past-due accounts receivable, compared to that of previous years.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 30
An auditor is performing a review of a complex process to identify opportunities to increase efficiency. What is the most practical way to document the process to identify areas of inefficiency?
A. Writeadescriptionoftheprocessactivitiesinsequentialorder.
B. DevelopaPERT(programevaluationandreviewtechnique)diagram. C. Flowchart the process.
D. Create a decision tree.
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
fit answer.
QUESTION 31
Which of the following methods would an auditor most likely use to document a complex sales order process?
A. Developahorizontalflowchart,withsupportingdocumentationforkeycontrolpoints.
B. Createacriticalpathmethodchart,notingtheprocessesinvolvedforeachstep.
C. Perform a process review, assigning time and cost to each step of the process to develop a hierarchy flowchart.
D. Utilize a systems narrative, which can be updated during subsequent audits.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
up to date answer.
QUESTION 32
An internal auditor is evaluating controls over the purchasing function. The function includes the material control department, the purchasing department, and the receiving department. Which of the following is true regarding the presentation of the process flow among the three departments?
A. Averticalflowchartofeachdepartment,showinginputsatthetopandoutputsatthebottom,wouldbe most useful.
B. Flowchartsarenotusefulfordocumentingprocessflow.
C. A horizontal flowchart, with the departments described across the top and the process flowing horizontally, would be most useful.
D. Both a flowchart and narratives are needed due to the number of departments involved.
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 33
A fast-food company is developing a computer simul-ation involving arrival time at a drive-through restaurant. The distribution for arrival times is:
Time
Single-Digit Random Between Arrivals Probability
Number Assigned
1 minute
0.1
2 minutes
0.2
1, 2
3 minutes
0.3
3, 4, 5
4 minutes
0.4
6, 7, 8, 9
Six random numbers are selected to represent the arrival of six cars: 1, 6, 9, 0, 5, 6. The mean time between arrivals for these cars, in this run of the simul-ation model, is:
A. 1minute.
B. 2minutes. C. 3 minutes. D. 4 minutes.
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
answer is to the point.
QUESTION 34
The internal auditor of a bank has developed a multiple regression model which has been used for a number of years to estimate the amount of interest income f
Which of the following audit techniques provides for continuous monitoring and analysis of computer transactions for detailed auditing?
A. Integratedtestfacility.
B. Parallelsimul-ation.
C. Test data.
D. Embedded audit routines.
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
answer is right.
QUESTION 2
Access control software on an organization's mainframe computer records detailed information concerning both successful and unsuccessful log-on attempts to applications. Which of the following audit tools would be best suited to review the access information that has been recorded?
A. Generalizedauditsoftware. B. Flowcharting.
C. Integrated test facility.
D. Test data.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 3
Which of the following would provide the greatest assurance of the accuracy of a computer program's computation of freight charges for catalog sales?
A. Usediscoverysampling,selectingtransactionsfrominvoiceswhichshouldhavefreightchargesadded to them.
B. Useeithertestdataorparallelsimul-ationtotestthecomputerapplication.
C. Use difference estimation, selecting transactions from invoices which should have freight charges added to them.
D. Use generalized audit software to select a monetary-unit sample of invoices that have been billed to customers.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
absolute answer.
QUESTION 4
If an auditor used nonstatistical sampling instead of statistical sampling to estimate the value of inventory, which of the following would be true?
A. Theconfidencelevelcouldnotbequantified. B. Theprecisionwouldbelarger.
C. The projected value of inventory would be less reliable. D. The risk of incorrect acceptance would be higher.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
fine.
QUESTION 5
In a sampling application, the group of items about which the auditor wants to estimate some characteristic is called the.
A. Population.
B. Attributeofinterest. C. Sample.
D. Sampling unit.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
answer is perfect.
QUESTION 6
An internal auditor would most likely use attributes sampling when testing which of the following?
A. Accountsreceivablebalances.
B. Correctcodingofaccountspayabledisbursementvouchers. C. Year-endinventoryvalue.
D. Fixed asset book value.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
answer is perfect.
QUESTION 7
An audit department has received anonymous information that an employee has allegedly been able to steal and cash checks sent to the organization by customers. What is the most efficient way for an auditor to determine how this type of fraud could occur and who might be the perpetrator?
A. Confirm accounts receivable.
B. Confirm accounts payable.
C. Review the endorsements and banks of deposit on customers' canceled checks. D. Flowchart and analyze key controls in the cash receipts process.
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
Best answer.
QUESTION 8
If an auditor expects to find numerous discrepancies between recorded values and audited values of sample selections, which sampling technique would be most appropriate?
A. Attributessampling.
B. Probability-proportional-to-sizesampling. C. Difference estimation sampling.
D. Discoverysampling.
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
absolute answer.
QUESTION 9
During an audit of a retail organization, an internal auditor found a scheme in which the warehouse director and the purchasing agent diverted approximately $500,000 of goods to their own warehouse, then sold the goods to third parties. The fraud was not found earlier since the warehouse director updated the perpetual inventory records and then forwarded receiving reports to the accounts payable department for processing. Which of the following procedures would have most likely led to the discovery of the missing materials and the fraud?
A. Selectarandomsampleofreceivingreportsandtracetotherecordingintheperpetualinventory records. Note differences and investigate by type of product.
B. Selectarandomsampleofpurchaseordersandtracetoreceivingreportsandtotherecordsinthe accounts payable department.
C. Take an annual physical inventory, reconciling amounts with the perpetual inventory records. Note the pattern of differences and investigate.
D. Select a random sample of sales invoices and trace to the perpetual inventory records to see if inventory was on hand. Investigate any differences.
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
options are clearly written.
QUESTION 10
Which of the following factors would increase the confidence level in a variables sampling plan?
A. Alargersamplesize.
II. A stratified sample.
III. A larger standard deviation.
B. IandIIonly
C. I and III only
D. II and III only
E. I,II,andIII
Correct Answer: A Section: (none)
Explanation Explanation/Reference:
proper answer.
QUESTION 11
If an auditor is sampling to test compliance with a particular company policy, which of the following factors should not affect the allowable level of sampling risk?
A. Theexperienceandknowledgeoftheauditor.
B. Theadverseconsequencesofnoncompliance.
C. The acceptable level of risk of making an incorrect audit conclusion. D. The cost of performing auditing procedures on sample selections.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
exact answer.
QUESTION 12
Which of the following describes an internal auditor's responsibilities to include audit procedures to detect fraud in audits of a multinational organization?
A. InternationalAccountingStandardsrequiretheinternalauditortoincludeauditprocedureswhichwould detect fraud if it would cause a material misrepresentation of the financial statements.
B. Internalauditorsdonothaveanyspecificresponsibilitieswithrespecttoincludingfraud-relatedaudit procedures.
C. Proper audit procedures, when carried out with due professional care, will guarantee that fraud, if present, will be detected.
D. If significant control weaknesses are detected, additional tests should be directed toward other indicators of fraud.
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
genuine answer.
QUESTION 13
An appliance repair company is considering relocating the center that houses its service vehicles. An internal auditor wants to determine the potential reduction in average miles driven by the service vehicles if the center is relocated. Which of the following statistical sampling methods would be most appropriate for this test?
A. Attributessampling.
B. Discoverysampling.
C. Probability-proportional-to-size sampling. D. Mean-per-unit sampling.
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
real answer.
QUESTION 14
Monetary-unit sampling is most useful when the internal auditor:
A. Istestingtheaccountspayablebalance.
B. Cannotcumulativelyarrangethepopulationitems. C. Expects to find several material errors in the sample. D. Is concerned with overstatements.
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
rightful answer.
QUESTION 15
If management expects 100 percent compliance with a procedure, which of the following sampling approaches would be most appropriate?
A. Attributessampling. B. Discoverysampling. C. Targeted sampling. D. Variables sampling.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
answer is valid.
QUESTION 16
An internal auditor is discussing an audit problem with an engagement client. While listening to the client, the internal auditor should:
A. Preparearesponsetotheclient.
B. Takementalnotesonthespeaker'snonverbalcommunication,asitismoreimportantthanwhatis being said.
C. Make sure that all details, as well as the main ideas of the client, are remembered.
D. Integrate the incoming information from the client with information that is already known.
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 17
An auditor is using an internal control questionnaire as part of a preliminary survey. Which of the following is the best reason for the auditor to interview management regarding the questionnaire responses?
A. Interviewsprovidetheopportunitytoinsertquestionstoprobepromisingareas.
B. Interviewsarethemostefficientwaytoupgradetheinformationtothelevelofobjectiveevidence.
C. Interviewing is the least costly audit technique when a large amount of information is involved.
D. Interviewing is the only audit procedure which does not require confirmation of the information that is obtained.
Correct Answer: A Section: (none)
Explanation Explanation/Reference:
Explanation:
QUESTION 18
Many questionnaires are made up of a series of different questions that use the same response categories (for example: strongly agree, agree, neither, disagree, strongly disagree). Some designs will have different groups of respondents answer alternate versions of the questionnaire that present the questions in different orders and reverse the orientation of the endpoints of the scale (for example:
agree on the right and disagree on the left). The purpose of such questionnaire variations is to:
A. Eliminateintentionalmisrepresentations.
B. Reducetheeffectsofpatternresponsetendencies.
C. Test whether respondents are reading the questionnaire.
D. Make it possible to get information about more than one population parameter using the same questions.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 19
An auditor used a questionnaire during an interview to gather information about the nature of credit sales processing. The questionnaire did not cover some pertinent information offered by the person being interviewed, and the auditor did not document the potential problems for further investigation.
The primary deficiency with the above process is that:
A. Theauditorfailedtoconsidertheimportanceoftheinformationoffered.
B. Aquestionnairewasusedinasituationwhereastructuredinterviewshouldhavebeenused. C. Using a questionnaire precludes the auditor from documenting other information.
D. The engagement program was incomplete.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 20
The use of standard operating procedure questionnaires in audit fieldwork can be beneficial because.
A. Thesequestionnairescanbothidentifydiscrepanciesandeducateclients.
B. Standardoperatingproceduresareessentialtotheeffectivenessandefficiencyofoperations.
C. These questionnaires are more comprehensive than are other types of techniques for gathering data during fieldwork.
D. These questionnaires do not normally require prior clearance with management of the audited area.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 21
Checklists used to assess audit risk have been criticized for all of the following reasons except:
A. Providingafalsesenseofsecuritythatallrelevantfactorsareaddressed.
B. Inappropriatelyimplyingequalweighttoeachitemonthechecklist.
C. Decreasing the uniformity of data acquisition.
D. Being incapable of translating the experience or sound reasoning intended to be captured by each item on the checklist.
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
straight answer.
QUESTION 22
A limitation of using ratio analysis in an audit engagement is that it:
A. Oftenusesfinancialinformationprovidedbymanagementwhichhasnotbeenreviewedforreliability and validity.
B. Isanexpensivemethodoftesting.
C. Requires computer software in order to develop meaningful interpretations of data.
D. Is useful only when comparisons can be made across other industries.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 23
Which of the following would cause a company's accounts receivable turnover ratio to decrease steadily over a three-year period?
A. Anincreaseinthediscountofferedforearlypayment. B. Amoreliberalcreditpolicy.
C. Invoices provided on a weekly rather than a monthly basis. D. Increased cash sales.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
answer is real.
QUESTION 24
Which of the following would be the best audit procedure to use to determine if a division's unusually high sales and gross margin for November and December were the result of fraudulently recorded sales?
A. Traceasampleofshippingdocumentstorelatedsalesinvoicestoverifyproperbilling.
B. Confirmaccountsreceivablebalanceswithcustomers.
C. Compare sales and gross margin totals with those of the previous ten months and the first month of the following year.
D. Use regression analysis techniques to estimate the sales and cost of goods sold for November and December.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
satisfied with the answer.
QUESTION 25
Which of the following factors could interfere with effective problem solving by an internal auditor?
A. Reactingtopreviousexperienceswithclients. II. Focusing only on the most likely cause.
III. Correcting the symptoms of problems.
B. Ionly
C. III only
D. IandIIonly
E. I,II,andIII
Correct Answer: D Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 26
A company owns a machine that will produce 100 light switches in four hours. Due to increased demand, a second machine capable of producing 100 light switches in three hours has been added.
Approximately how many hours will it take to produce 100 light switches using both machines working together?
A. 7.0 B. 3.5 C. 1.7 D. 0.58
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 27
A retail sales company has discontinued a product that normally sold for $100. During the first month of a sale of the product, a 20 percent discount was given. Later that sale price was reduced by an additional 40 percent. What was the overall discount from the original selling price?
A. 60percent. B. 52percent. C. 48 percent.
D. 30 percent.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
nice.
QUESTION 28
A recent survey indicated that residents of a small town take the train to a nearby city eight times per month, on average. The same survey showed that the number of train trips that a resident takes per month (y) is determined by the number of days per month that the resident works in the nearby city (x), according to the equation: y = 2 + 2x. A person who never works in the nearby city is expected to take the train:
A. Zerotimespermonth. B. Twotimespermonth. C. Four times per month. D. Eight times per month.
Correct Answer: B Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 29
A manager of one of a retailer's several retail outlets is stealing cash from cash sales, recording the sales as accounts receivable, and subsequently writing off the fictitious accounts receivable as bad debts. Which of the following comparisons would be most effective in signaling the possibility of such a fraud?
A. Baddebtexpenseasapercentageofsales,comparedtothatoftheotheroutlets. B. Baddebtexpenseasapercentageofsales,comparedtothatofpreviousyears. C. Percentage of past-due accounts receivable, compared to that of the other outlets. D. Percentage of past-due accounts receivable, compared to that of previous years.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 30
An auditor is performing a review of a complex process to identify opportunities to increase efficiency. What is the most practical way to document the process to identify areas of inefficiency?
A. Writeadescriptionoftheprocessactivitiesinsequentialorder.
B. DevelopaPERT(programevaluationandreviewtechnique)diagram. C. Flowchart the process.
D. Create a decision tree.
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
fit answer.
QUESTION 31
Which of the following methods would an auditor most likely use to document a complex sales order process?
A. Developahorizontalflowchart,withsupportingdocumentationforkeycontrolpoints.
B. Createacriticalpathmethodchart,notingtheprocessesinvolvedforeachstep.
C. Perform a process review, assigning time and cost to each step of the process to develop a hierarchy flowchart.
D. Utilize a systems narrative, which can be updated during subsequent audits.
Correct Answer: A Section: (none) Explanation
Explanation/Reference:
up to date answer.
QUESTION 32
An internal auditor is evaluating controls over the purchasing function. The function includes the material control department, the purchasing department, and the receiving department. Which of the following is true regarding the presentation of the process flow among the three departments?
A. Averticalflowchartofeachdepartment,showinginputsatthetopandoutputsatthebottom,wouldbe most useful.
B. Flowchartsarenotusefulfordocumentingprocessflow.
C. A horizontal flowchart, with the departments described across the top and the process flowing horizontally, would be most useful.
D. Both a flowchart and narratives are needed due to the number of departments involved.
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
Explanation:
QUESTION 33
A fast-food company is developing a computer simul-ation involving arrival time at a drive-through restaurant. The distribution for arrival times is:
Time
Single-Digit Random Between Arrivals Probability
Number Assigned
1 minute
0.1
2 minutes
0.2
1, 2
3 minutes
0.3
3, 4, 5
4 minutes
0.4
6, 7, 8, 9
Six random numbers are selected to represent the arrival of six cars: 1, 6, 9, 0, 5, 6. The mean time between arrivals for these cars, in this run of the simul-ation model, is:
A. 1minute.
B. 2minutes. C. 3 minutes. D. 4 minutes.
Correct Answer: C Section: (none) Explanation
Explanation/Reference:
answer is to the point.
QUESTION 34
The internal auditor of a bank has developed a multiple regression model which has been used for a number of years to estimate the amount of interest income f