Section A

Question 1

Internal Audit Charter is written by

Answer 1

Chief Audit Executive (CAE)

Question 2

Internal Audit Charter is approved by

Answer 2

Senior Management and board/audit committee

Question 3

Internal Audit Charter includes the following characteristics:

Answer 3

S- Scope (of services to be performed)
O- Objectives (of I/A activity)
A- Authority (of what the I/A activity has
access to. e.g. records, personnel, etc)
A- Accountability
R- Responsibility

Question 4

What is the audit committees function

Answer 4

1. It is a subcommittee of the board.
2. It receives reports and communications for both internal/external auditors.
3. Usually oversees the work of the IIA and manages relationship with the external auditor

Question 5

Who should be members of the “Audit Committee”?

Answer 5

Should be independent non-executive directors (NEDs)
(NEDs are board members who do not have a role in the day to day operations of the company and do not have a financial interest/other relationships)

Question 6

What should the Audit Committee charter contain?

Answer 6

Should entail the audit committee’s POWERS, DUTIES, and RESPONSIBILITIES

Question 7

What does the IIA stand for?

Answer 7

Institute of Internal Audit

Question 8

Definition of Objectivity

Answer 8

Objectivity is an UNBIASED mental attitude that allows IA to perform engagements in such a manner that they believe in their work product and that no quality compromises are made

Question 9

Definition of Independence

Answer 9

Independence is the freedom from conditions that threaten the ability of the IIA to carry our IA responsibilities in an UNBIASED manner (IA are considered to be independent when they are able to perform their work freely and objectively)

Question 10

Definition of Organizational Independence

Answer 10

The crucial element of having organizational independence is for the CAE to have a reporting line in the organization that will allow the IAA to fulfill its tasks. Therefore, it is vital for IAAs to have the support of senior management and of the board so that they are able to work freely and without interference.

Question 11

Standard 1100

Answer 11

Independence and Objectivity

Question 12

Standard 1110

Answer 12

Organizational Independence

Question 13

Standard 1111

Answer 13

Direct Interaction with the Board

Question 14

What does it mean when the CAE is communicating and interacting directly with the board and not through another department or anyone else?

Answer 14

“Functional reporting”

Question 15

What standard is it when the CAE must communicate and interact directly with the board?

Answer 15

Standard 1111: Direct Interaction with the Board

Question 16

Standard 1120

Answer 16

Individual Objectivity

Question 17

What standard is it when IA must have an impartial, unbiased attitude and avoid any conflict of interest”

Answer 17

Standard 1120 : Individual Objectivity

Question 18

In Standard 1120, IA must remain objective in their work, what does this mean:

Answer 18

1. Must be impartial
2. Have an unbiased attitude
3. Avoid conflicts of interest

Question 19

What kind of appearance does a conflict of interest give?

Answer 19

Gives an appearance of impropriety that can UNDERMINE confidence in the internal auditor.

Question 20

What does it mean when an IA has objectivity?

Answer 20

That the IA will make conclusion or decisions based on the facts at hand without being influenced by feelings, emotions, relationships with others, bribes, or ANY other outside influences. The IA must have an honest belief in their work and believe that no comprises were made in respect to the quality of work.

Question 21

Can or should a IA accept a gift or money from client, why or why not?

Answer 21

It will impair objectivity of the auditor. It would appear that eh the auditor is not independent.

Question 22

What should IA do if they are offered gifts or money?

Answer 22

This needs to be immediately reported the auditors supervisor.

Question 23

Standard 1130

Answer 23

Impairments to Independence or Objectivity

Question 24

Who must the IA report impairments to?

Answer 24

CAE or appropriate parties

Question 25

What are examples of impairments?

Answer 25

Personal conflict of interest, scope limitation, or pressure from management.

Question 26

What is a scope limitation?

Answer 26

its a restriction on the work that the IAA activity want to perform that prevents it from accomplishing its objectives and plans. A scope limitation can also restrict the IAA’s access to records, personnel etc that they normally should have access to.

Question 27

How much time should pass that a IA can audit an area that they have work in before?

Answer 27

At least 1 year

Question 28

Should a IA draft procedures?

Answer 28

NO - the internal auditor should not draft procedures for testing that controls are installed. This puts the internal auditor in a position to say that the tests are installed when they are not, and then going back and taking advantage of the poorly designed system. The internal auditor can test to see that the controls are installed, but should not establish the procedures for running that application.

Question 29

Standard 1210

Answer 29

Proficiency

Question 30

Standard 1210

Answer 30

Proficiency

Question 31

What does proficiency mean in Standard 1210?

Answer 31

Proficient in the skills necessary to do the job

Question 32

In regards to performance of engagements, internal auditors need to be:

Answer 32

“Proficient in the application of Internal auditing standards, procedures, and techniques”

Question 33

Define what the standard mean when it states “proficient”

Answer 33

Being proficient means that the individual is knowledgable enough and has enough experience to be able to identify the problem and also be able to solve it.

Question 34

Define what the standard mean when it states “understanding”

Answer 34

Understanding is the ability to apply broad knowledge to situations likely to be encountered, to recognize material deviations, and tho be able to perform research to arrive at conclusions.

Question 35

Define what the standard mean when it states “appreciation”

Answer 35

Appreciation is the ability to recognize the existence of problems and potential problems and to determine if further work or assistance is required.