Financial, Environmental, and Consulting Engagements Flashcards
In any organization-wide risk management assessment, the CAE should include risks associated with which of the following activities?
Environmental.
Health.
Safety.
All of the answers are correct.
All of the answers are correct.
An organization is considering purchasing a commercial property. Because of the location of the property and the known recent history of activities on the property, management has asked the internal audit activity, in cooperation with legal counsel, to provide a preliminary identification of any environmental liability. The strongest reason supporting management’s decision to request such an investigation is
The potential for future liability may outweigh an advantages achieved by obtaining the property.
Management will be able to pay a lower price for the property if environmental contamination can be identified.
The current owner would be required by law to clean up all identified contamination before the sale is closed.
Regulatory agencies require a purchaser to identify and disclose all actual and potential instances of contamination.
The potential for future liability may outweigh an advantages achieved by obtaining the property.
Which of the following suggestions for the CAE related EHS auditing is false?
The CAE should foster a close working relationship with the chief environmental officer and coordinate activities with the plan for environmental auditing.
At least once every three years, the CAE should schedule a quality assurance review of the environmental audit function if it is organizationally independent of the internal audit function.
The CAE should evaluate the organizational placement and independence of the environmental audit function to ensure that significant matters resulting from serious risks to the enterprise are reported up the chain of command.
The CAE should evaluate whether the environmental auditors, who are not part of the CAE’s organization, are in compliance with recognized professional auditing standards and a recognized code of ethics.
At least once every three years, the CAE should schedule a quality assurance review of the environmental audit function if it is organizationally independent of the internal audit function.
Internal auditors are increasingly called on to perform audits related to an organization’s environmental stewardship. Which of the following does not describe the objectives of a type of environmental audit?
Determine whether environmental management systems are in place and operating properly to manage future environmental audit.
Determine whether environmental issues are considered as part of economic decisions.
Determine whether the organization’s current actions are in compliance with existing laws.
Determine whether the organization is focusing efforts on ensuring that its products are environmentally friendly, and confirm that product and chemical restrictions are met.
Determine whether environmental issues are considered as part of economic decisions.
What type of audit assesses the environmental risks and liabilities of land or facilities prior to a properly transaction?
Pollution prevention audit.
Compliance audit.
Transactional audit.
Product audit.
Transactional audit.
Smith Ice Plant (SIP) is located on the Mississippi River. SIP has a history of leaking pollutants into the Mississippi. Among the following environmental risk exposures, which one does, SIP not have to evaluate as part of its organization-wide environmental risk management assessment?
History of financial distress.
Likelihood of water pollution fines.
History of employee injuries.
Likelihood of loss of public reputation.
History of financial distress.
Which of the following is true about the interaction of the internal audit function and the environmental audit function?
If the environmental audit function reports to someone other than the CAE, the CAE should not offer to review the audit plan sine (s)he was not consulted to do so.
It is not advantageous for the internal audit function to conduct environmental audits since it is busy with its current responsibilities.
The CAE should evaluate whether the environmental auditors are conforming to recognized professional auditing standards and a recognized code of ethics.
The CAE should not evaluate the organizational placement and independence of the environmental audit function has no control over a separate environmental audit function.
The CAE should evaluate whether the environmental auditors are conforming to recognized professional auditing standards and a recognized code of ethics.
An engagement objective is to determine if a company’s accounts payable contain all outstanding liabilities. Which of the following audit procedures would not be relevant for this objective?
Examine supporting documentation of subsequent (after-period) cash disbursements and verify period of liability.
Send confirmations, including zero-balance accounts, to vendors with whom the company normally does business.
Select a sample of accounts payable from the accounts payable listing and verify the supporting receiving reports, purchase orders, and invoices.
Trace receiving reports issued before the period end to the related vendor invoices and accounts payable listing.
Select a sample of accounts payable from the accounts payable listing and verify the supporting receiving reports, purchase orders, and invoices.
Which of the following engagement procedures provides the best information about the collectability of notes receivable?
Confirmation of note receivable balances with the debtors.
Examination of notes for appropriate debtors’ signatures.
Reconciliation of the detail of notes receivable and the provision for uncollectible amounts to the general ledger control.
Examination of cash receipts records to determine promptness of interest and principal payments.
Examination of cash receipts records to determine promptness of interest and principal payments.
Shipments are made from the warehouse based on customer purchase orders. The matched shipping documents and purchase orders are then forwarded to the billing department for sales invoice preparation. The shipping documents are neither accounted for nor prenumbered. Which of the following substantive tests should be extended as a result of this control weakness?
Select sales invoices from the sales register and examine the related shipping documents.
Select bills of lading from the warehouse and trace the shipments to the related sales invoices.
Foot the sales register and trace the total to the general ledger.
Trace quantities and prices on the sales invoice to the customer purchase order and test extensions and footings.
Select bills of lading from the warehouse and trace the shipments to the related sales invoices.
An engagement to review payroll is least likely to include
Tests of computations for gross and net wages.
Comparison of payroll costs to budget.
Tracing a sample of employee names to employment records in the personnel department.
Observing the physical distribution of paychecks.
Observing the physical distribution of paychecks.
An internal auditor fails to discover an employee fraud during an assurance engagement. The nondiscovery is most likely to suggest a violation of the International Professional Practices Framework if it was the result of a
Failure to perform a detailed review of all transactions in the area.
determination that any possible fraud in the area would not involve a material amount.
Determine that the cost of extending procedures in the area would exceed the potential benefits.
Presumption that the internal controls in the area were adequate and effective.
Presumption that the internal controls in the area were adequate and effective.
Controls should be designed to ensure that
Operations are performed efficiently.
Management’s plans have not been circumvented by worker collusion.
The internal audit activity’s guidance and oversight of management’s performance is accomplished economically and efficiently.
Management’s planning, organizing, and direction processes are properly evaluated.
Operations are performed efficiently.
The chief audit executive’s responsibility for assessing and reporting on control processes includes
Communicating to senior management and the board an annual judgement about internal control.
Overseeing the establishment of internal control processes.
Maintaining the organization’s governance processes.
Arriving at a single assessment based solely on the work of the internal audit activity.
Communicating to senior management and the board an annual judgement about internal control.
What should the CAE do if the scope of the internal audit plan is insufficient to permit expression of an opinion about risk management and control?
Design more procedures to ensure the audit plan becomes sufficient.
The CAE should inform senior management and the board about gaps in audit coverage.
Make the decision to outsource the internal audit function so the scope of the audit plan can be sufficient.
Hire more internal auditors to increase the scope of the engagement.
The CAE should inform senior management and the board about gaps in audit coverage.
