Assurance & Compliance Engagements Flashcards
The chief executive officer wants to know whether the purchasing function is properly meeting its charge to “purchase the right materials at the right time in the right quantities.” Which of the following types of engagements addresses this request?
A financial engagement relating to the purchasing department.
An operational engagement relating to the purchasing function.
A compliance engagement relating to the purchasing function.
A full-scope engagement relating to the manufacturing operation.
An operational engagement relating to the purchasing function.
The primary difference between operational engagements and financial engagements is that, in the former, the internal auditors
Are not concerned with whether the client entity is generating information in compliance with financial accounting standards.
Are seeking to help management use resources in the most effective manner possible.
Start with the financial statements of the client entity and work backward to the basic processes involved in producing them.
Can use analytical skills and tools that are not necessary in financial engagements.
Are seeking to help management use resources in the most effective manner possible.
During an operational engagement, the internal auditors compare the current staffing of a department with established industry standards to
Identify bogus employees on the department’s payroll.
Assess the current performance of the department and make appropriate recommendations for improvement.
Evaluate the adequacy of the established internal controls for the department.
Determine whether the department has complied with all lass and regulations governing its personnel.
Assess the current performance of the department and make appropriate recommendations for improvement.
Which group is charged with overseeing the establishment, administration, and evaluation of the processes of risk management and control?
Operating managers.
Internal auditors.
External auditors.
Senior management.
Senior management.
Which of the following statements about control self-assessment (CSA) is false?
CSA is usually an informal and undocumented process.
In its purest form, CSA integrates business objectives and risks with control processes.
CSA is also known as control/risk self-assessment.
Most implemented CSA programs share some key features and goals.
CSA is usually an informal and undocumented process.
In reviewing a cost-plus construction contract for a new catalog showroom, the internal auditor should be cognizant of the risk that
The contractor could be charging for the use of equipment not used in the construction.
Income taxes related to construction equipment depreciation may have been calculated erroneously.
Contractor cash budgets could have been inappropriately complied.
Payroll taxes may have been inappropriately omitted from billings.
The contractor could be charging for the use of equipment not used in the construction.
A company would like to contract for janitorial services for 1 year with 4 option years. The specifications require the potential contractor to perform certain cleaning services at specified intervals. Which of the following is the best contract type for this requirement?
Cost-reimbursable.
Indefinite delivery.
Fixed-price.
Time-and-materials.
Fixed-price.
An internal auditor is conducting an audit of environmental protection and alarm devices. Which is the most significant objective of such an assignment? To determine whether
The devices are installed and operating properly.
The costs of the devices were properly recorded.
The device specification documents ate complete.
Acquisitions and disposals are properly authorized.
The devices are installed and operating properly.
Which of the following does the internal auditor not have to review as thoroughly in a lump-sum contract?
Progressive payments.
Adjustments to labor costs.
Work completed in accordance with the contract.
Incentives associated with the contract.
Work completed in accordance with the contract.
Total quality management in a manufacturing environment is best exemplified by
Identifying and reworking production defects before sale.
Designing the product to minimize defects.
Performing inspections to isolate defects as early as possible.
Making machine adjustments periodically to reduce defects.
Designing the product to minimize defects.
Which forms of control self-assessment assume that managers and members of work teams possess an understanding of risk and control concepts and use those concepts in communications?
The self-certification approach.
The self-certification approach and facilitated approach.
The self-certification approach and questionnaire approach.
All self-assessment programs.
All self-assessment programs.
Which of the following statements about TQM is false?
This approach can increase revenues and decrease costs significantly.
TQM is a comprehensive approach to quality.
TQM begins with internal suppliers’ requirements.
TQM concepts are applicable to the operations of the internal audit activity itself.
TQM begins with internal suppliers’ requirements.
TQM is the continuous pursuit of quality in every aspect of organizational activities through a number of goals. Which of the following is not one of those goals?
A philosophy of doing it right the first time.
Promotion of individual work.
Employee training and empowerment.
Improvement of processes.
Promotion of individual work.
An internal audit team is performing a due diligence audit to assess plans for a potential merger/acquisition. Which of the following would be the least valid reason for a company to merge with or acquire another company?
To diversify risk.
To respond to government policy.
To reduce labor costs.
To increase stock prices.
To increase stock prices.
An organization is considering purchasing a small toxic waste disposal business. The internal auditors are part of the team doing a due diligence review for the acquisition. The scope of the internal auditors’ work will most likely not include
An evaluation of the merit of lawsuits currently filed against the acquiree.
A review of the acquirree’s procedures for acceptance of waste material and comparison with legal requirements.
Analysis of the acquiree’s compliance with, and disclosure of, loan covenants.
Assessment of the efficiency of the operations of the acquiree.
An evaluation of the merit of lawsuits currently filed against the acquiree.
