CHAPTER 3 Flashcards
This identifies what the internal audit function will review based on available resources and the needs and priorities of the organization.
A. Audit Checklist
B. Audit Plan
C. Operations Manual
D. Audit Manual
B. Audit Plan
________ factors are conditions and other variables that in their present, or absence, as the case may be, either exacerbate or diminish the underlying risk.
A. Risk
B. Audit
C. Operations
D. Planning
A. Risk
The following questions/inquiries can be used in determining risk, EXCEPT: A. Where are the people, processes, systems, or assets vulnerable?
B. What could go wrong?
C. What is the passcode lock of that computer?
D. How could that unit fail?
C. What is the passcode lock of that computer?
Audit Evidence can be in the form of the following, EXCEPT:
A. Observation
B. Workpapers
C. Flowcharts
D. None of the above. All options are forms of audit evidence.
D. None of the above. All options are forms of audit evidence.
A review of how an organization’s management and its operating procedures are functioning with respect to their effectiveness and efficiency in meeting stated objectives.
A. Internal Audit
B. Operational Audit
C. Cash Audit
D. External Audit
B. Operational Audit
The auditor faces a risk that the audit will not detect material misstatements in the financial statements. In regard to minimizing this risk, the auditor primarily relies on:
A. Substantive procedures
B. Tests of controls
C. Internal control
D. Statistical analysis
A. Substantive procedures
Which of the following is least likely to be included in an auditor’s inquiry of management while obtaining information to identify the risks of material misstatement due to fraud?
A. Are all financial reporting operations at one location?
B. Does it have knowledge of fraud or suspect fraud?
C. Does it have programs to mitigate fraud risks?
D. Has it reported to the audit committee the nature of the company’s internal control?
A. Are all financial reporting operations at one location?
The primary purpose of the internal auditors’ evaluation of internal control is to:
A. Determine if management has planned and implemented activities needed to attain goals and objectives.
B. Determine the extent of tests of controls needed during field work.
C. Identify areas for fraud investigation.
D. Determine if employees have incompatible duties that have compromised the control environment.
A. Determine if management has planned and implemented activities needed to attain goals and objectives.
The internal auditing department provides information about control and quality of performance to:
A. Management and the board of directors.
B. A level in the organization sufficient to ensure acceptance of all recommendations
C. Outside agencies for regulatory and financial compliance.
D. Any member of the organization upon request.
A. Management and the board of directors.
The scope of an internal audit is initially defined by the:
A. Audit objectives
B. Scheduling and time estimates
C. Preliminary survey
D. Audit program
A. Audit objectives
Interviewing operating personnel, identifying the objectives of the auditee, identifying standards used to evaluate performance, and assessing the risk inherent in the auditee’s operations are activities typically performed in which phase of an internal audit?
A. The fieldwork phase
B. The preliminary survey phase
C. The audit programming phase
D. The reporting phase
B. The preliminary survey phase
Which of the following best describes the scope of internal auditing as it has developed to date?
A. Internal auditing involves appraising the economy and efficiency with which resources are employed.
B. Internal auditing involves evaluating compliance with policies, plans, procedures, laws, and regulations.
C. Internal auditing has evolved to verifying the existence of assets and reviewing the means of safeguarding assets.
D. Internal auditing has evolved to more of an operational orientation from a financial orientation.
D. Internal auditing has evolved to more of an operational orientation from a financial orientation.
Which of the following statements best describes why the profession of certified public accountants has deemed it essential to promulgate a code of professional conduct and to establish a mechanism for enforcing observation of the code?
A. A distinguishing mark of a profession is its acceptance of responsibility to the public.
b. A prerequisite to success is the establishment of an ethical code that stresses primarily the professional’s responsibility to clients and colleagues.
C. A requirement of most state laws calls for the profession to establish a code of ethics.
D. An essential means of self-protection for the profession is the establishment of flexible ethical standards by the professions.
A. A distinguishing mark of a profession is its acceptance of responsibility to the public
A primary purpose for establishing a code of conduct within a professional organization is to:
A. Reduce the likelihood that members of the profession will be sued for substandard work
B. Ensure that all members of the profession perform at approximately the same level of competence
C. Demonstrate acceptance of responsibility to the interests of those served by the profession
D. Require members of the profession to exhibit loyalty in all matters pertaining to the affairs of their organization.
C. Demonstrate acceptance of responsibility to the interests of those served by the profession
Corporate governance is a process by which the owners and creditors of an organization
A. Exert control.
B. Require accountability.
C. Exert control and require accountability.
D. Neither exerts control nor requires accountability.
C. Exert control and require accountability.
