Communicate Results & Monitor Outcomes Flashcards
During an engagement involving the receiving section of the purchasing division, the internal auditor discovers that a receiving problem might be the result of procedures followed in the procurement section. The internal audit activity’s management agrees that the internal auditor should extend the engagement, on a limited scale, into the procurement section. According to the standards, which device should be used to communicate the change in engagement scope to the engagement client?
An informal notification of the involved supervisor.
A formal written communication to the involved supervisor.
A written interim communication to the involved supervisor and the same distribution as the original correspondence scheduling the engagement.
No communication is necessary if the internal audit activity’s charter specifies the unrestricted scope of its work.
A written interim communication to the involved supervisor and the same distribution as the original correspondence scheduling the engagement.
You are conducting an engagement to evaluate the organization’s marketing effort. You agreed to keep the marketing vice president informed of your progress on a regular basis. What method should be used for those progress reports?
Oral or written interim reports.
Written reports signed by the chief audit executive.
Copies of working papers summaries.
Briefing by the appropriate marketing first-line supervisor.
Oral or written interim reports.
Which of the following is false with respect to the use of interim engagement communications? Interim engagement communications
Are used to communicate information that requires immediate attention.
Are used to communicate a change in engagement scope for the activity under review.
Keep management informed of engagement progress when engagements extend over a long period time.
Eliminate the need for issuing final engagement communications.
Eliminate the need for issuing final engagement communications.
Who reviews and approves a summary of the internal audit plan?
Senior management and the board.
The audit committee and the board.
Senior management only.
The chief audit executive (CAE) only.
Senior management and the board.
As the chief audit executive, you have determined that the acquisition of some expensive, state-of-the-art software for paperless working paper files will be useful. Identify the preferred method for presenting your request to senior management.
The effect of not obtaining the software.
Statement of need.
Comparison with other internal audit activities.
Evaluation of the software’s technical specifications.
The effect of not obtaining the software.
Bobby Fitz, CAE, believes that the internal controls over cash disbursements need major revisions. Mr. Fitz discussed this matter with senior management and was very alarmed at their acceptance of this serious risk. What action should Mr. Fitz take next?
Report the matter to the board immediately.
Understand management’s basis for accepting the risk.
Determine whether management has the authority to accept the risk.
Further attempt to resolve the disagreement.
Understand management’s basis for accepting the risk.
Recommendations should be included in audit reports to
Provide management with options for addressing audit findings.
Ensure that problems are resolved in the manner suggested by the auditor.
Minimize the amount of time required to correct audit findings.
Guarantee that audit findings are addressed, regardless of cost.
Provide management with options for addressing audit findings.
An engagement communication relating to an engagement performed at a bank categorizes observations as “deficiencies” for major problems and “other areas for improvement” for less serious problems. Which of the following excerpts is properly included under “other areas for improvement?”
Many secured loans did not contain hazard insurance coverage for tangible property collateral.
Loan officers also prepare the cashier’s checks for disbursement of the loan proceeds.
The bank is incurring unnecessary postage cost by not combining certain special mailings to checking account customers with the monthly mailing of their statements.
At one branch a large amount of cash was placed on a portable table behind the teller lines.
The bank is incurring unnecessary postage cost by not combining certain special mailings to checking account customers with the monthly mailing of their statements.
While performing an operational engagement involving the firm’s production cycle, an internal auditor discovers that, in the absence of specific guidelines, some engineers and buyers routinely accept vacation trips paid by certain of the firm’s vendors. Other engineers and buyers will not accept even a working lunch paid for by a vendor. Which of the following actions should the internal auditor take?
None. The engineers and buyers are professionals. An internal auditor should not inappropriately interfere in what is essentially a personal decision.
Informally counsel the engineers and buyers who accept the vacation trips. This helps prevent the possibility of kickbacks, while preserving good internal auditor-engagement client relations.
Formally recommend that the organization establish a code of ethics. Guidelines of acceptable conduct, within which individual decisions may be made, should be provided.
Issue a formal engagement communication naming the personnel who accept vacations but make no recommendations. Corrective action is the responsibility of management.
Formally recommend that the organization establish a code of ethics. Guidelines of acceptable conduct, within which individual decisions may be made, should be provided.
A recommendation in a final engagement communication should address what attribute?
Cause.
Statement of condition.
Criteria.
Effect.
Cause.
Which of the following is the most appropriate method of reporting disagreement between the internal auditor and the engagement client concerning engagement observations and recommendations?
State the internal auditor’s position because the report is designed to provide the internal auditor’s independent view.
State the engagement client’s position because management is ultimately responsible for the activities reported.
State both positions and identify the reasons for the disagreement.
Sate neither position. If the disagreement is ultimately resolved, there will be no reason to report the previous disagreement. If the disagreement is never resolved, the disagreement should not be reported because there is no mechanism to resolve it.
State both positions and identify the reasons for the disagreement.
During the exit conference, the manager of the engagement client objected to a valid observation about a major control deficiency because the manager felt the observation was based upon a “biased sample and immaterial risk.” What step should the internal auditor take?
Let some neutral group coordinate the follow-up effort after the final engagement communication is issued.
Include the engagement client’s comments in the report but recommend corrective action.
Review the condition during the next annual engagement to determine whether the deficiency is major or minor.
Research a compromise by modifying the wording of the conclusion.
Include the engagement client’s comments in the report but recommend corrective action.
An internal auditor has uncovered illegal acts committed by a member of senior management. Such information
Should be excluded from the internal auditor’s engagement communication and discussed orally with the senior manager.
Must be immediately reported to the appropriate government authorities.
May be disclosed in a separate communication and distributed to all senior management.
May be disclosed in a separate communication and distributed to the board.
May be disclosed in a separate communication and distributed to the board.
An internal audit activity’s evaluation of sales contracts revealed that a bribe had been paid to secure a major contract. The strong possibility existed that a senior executive had authorized the bribe. Which of the following best describes the proper distribution of the completed final engagement communication?
The report should be distributed to the chief audit executive officer and the appropriate regulatory agency.
The report should be distributed to the board, the chief audit executive officer, and the independent external auditor.
The chief audit executive should provide the board a copy of the report and decide whether further distribution is appropriate.
The report should be distributed to the board, the appropriate law enforcement agency, and the appropriate regulatory agency.
The chief audit executive should provide the board a copy of the report and decide whether further distribution is appropriate.
Which of the following is most appropriate for inclusion in the summary of a final engagement communication?
Engagement client responses to recommendations.
A concise statement of engagement observations.
Reference to areas not covered by the engagement.
Discussion of recommendations given in prior years’ engagement communications.
A concise statement of engagement observations.
