Stategic & Operational Roles Of IA

Question 1

Internal auditing is an assurance and consulting activity. An example of an assurance service is a(n)

Advisory Engagement
Facilitation Engagement
Training Engagement
Compliance Engagement

Answer 1

Compliance engagement

Question 2

What is the most accurate term for the procedures used by the board to oversee activities performed to achieve organizational objectives?

Governance
Control
Risk management
Monitoring

Answer 2

Governance

Question 3

The key factor in the success of an internal audit activity’s human resources program is

An informal program for the developing and counseling staff
A compensation plan based on years of experience
A well developed set of selection criteria
A program for recognizing the special interests of individual staff members

Answer 3

A well developed set of selection criteria

Question 4

A basic principle of governance is

Assessment of the governance process by an independent internal audit activity.
Holding the board, senior management, and the internal audit activity accountable for its effectiveness.
Exclusive use of external auditors to provide assurance about the governance process.
Separation of the governance process from promoting an ethical culture in the organization.

Answer 4

Assessment of the governance process by an independent internal audit activity.

Question 5

Which of the following is most likely an internal audit role in a less structured governance process?

Design specific governance processes.
Playing a consulting role in optimizing governance processes and structure.
Providing advice about basic risks to the organization.
Evaluating the effectiveness of specific governance processes.

Answer 5

Providing advice about basic risks to the organization.

Question 6

Ensuring effective organizational Performance management and accountability is most directly the proper function of

Control
Governance
Risk management
A quality assurance program

Answer 6

Governance

Question 7

Which of the following is most essential for guiding the internal audit staff

Quality program assessments
Position descriptions
Performance appraisals
Policies and procedures

Answer 7

Policies and procedures

Question 8

Written policies and procedures relative to managing the internal audit activity should

Ensure compliance with its performance standards.
Give consideration to its structure and the complexity of the work performed.
Result in consistent job performance. Prescribed the format and distribution of engagement communications and the classification of observations.

Answer 8

Give consideration to its structure and the complexity of the work performed

Question 9

Audit committees have been identified as a major factor in promoting the independence of both internal and asked external auditors. Which of the following is the most important limitation on the effectiveness of audit committees?

Audit committees maybe composed of independent directors. However, those directors may have close personal and professional friendship with management. Audit committee members are compensated by the organization and thus favor and owner’s view.
Audit committees devote most of their efforts to external audit concerns and do not pay much attention to the internal audit activity in the overall control environment.
Audit committee members do not normally have degrees in the accounting or auditing field.

Answer 9

Audit committees may be composed of independent directors. However, those directors may have personal and professional friendships with management.

Question 10

The audit committee strengthens the control processes of an organization by

Assigning the internal audit activity responsibility for interaction with governmental agencies.
Using the chief audit executive as a major resource in selecting the external auditors. Following up on recommendations made by the chief audit executive.
Approving internal audit activity policies.

Answer 10

Following up on recommendations made by the chief audit executive.

Question 11

In accounting association established a code of ethics for all members. What is one of the association’s primary purposes of establishing the code ethics?

To outline criteria for professional behavior to maintain standards of integrity and objectivity.
To establish standards to follow for effective accounting practices.
To provide a framework within which accounting policies could be effectively developed and executed
To outline criteria that can be used in conducting interviews of potential new accountants.

Answer 11

To outline criteria for professional behavior to maintain standards of integrity and objectivity.

Question 12

The best reason for establishing a code of conduct within an organization is that such codes

Are typically required by governments.
Express standards of individual behavior for members of the organization.
Provide a quantifiable basis for personnel evaluations.
Have tremendous public relations potential.

Answer 12

Express standards of individual behavior for members of the organization.

Question 13

The code of ethics of a professional organization sets forth

Broad standards of conduct for the members of the organization.
Organizational details of the profession’s governing body.
A list of illegal activities that are proscribed to the members of the profession.
A basis for the measurement of internal audit performance.

Answer 13

Brought standards of conduct for the members of the organization.

Question 14

A chief audit executive should include in regular evaluations of internal and external audit activity an assessment of which of the following?

Only external audit cost.
Efficiency of only internal audit activity.
Aggregate audit cost.
Effectiveness of only external audit activity.

Answer 14

Aggregate audit cost.

Question 15

Which of the following is responsible for coordination of internal and external audit work?

The board.
The chief audit executive.
Internal auditors.
External auditors.

Answer 15

The chief audit executive.

Question 16

The internal audit activity has a role in an organization’s governance process. The internal audit activity most directly contributes to this process by

Identifying significant exposures to risk.
Evaluating the effectiveness of the risk-management system.
Promoting continuous improvement of controls.
Evaluating the design of ethics-related activities.

Answer 16

Evaluating the design of ethics-related activities.

Question 17

Employee resistance to change may be caused by

Only simple surprise or inertia.
Manipulation of information or events.
Bad timing.
Coercion.

Answer 17

Bad timing.

Question 18

Organizational change must be considered in the light of potential employer resistance. Resistance

May occur even though employees will benefit from the change.
Will be greatest when informal groups are weakest.
Will be insignificant if no economic loss by employees is expected.
Is centered mostly on perceived threats to psychological needs.

Answer 18

May occur even though employees will benefit from the change.

Question 19

Co-optation is a

Method of coping with employee resistance.
Cause of resistance to change.
Model for categorizing organizational changes.
Way of allowing meaningful input by resistant employees.

Answer 19

Method of coping with employee resistance.

Question 20

The purpose of the internal audit activity’s evaluation of the effectiveness of existing risk management processes is to determine that

Management has planned and designed so as to provide reasonable assurance of achieving objectives.
Management directs processes so as to provide reasonable assurance of achieving objectives.
The organization’s objectives will be achieved efficiently and economically.
The organization’s objectives will be achieved in an accurate and timely manner and with minimal use of resources.

Answer 20

Management directs processes so as to provide reasonable assurance of achieving objectives.

Question 21

Internal auditors should review the means of physically safeguarding assets from losses arising from

Misapplication of accounting principles.
Procedures that are not cost justified.
Exposure to the elements.
Under usage of physical facilities.

Answer 21

Exposure to the elements.

Question 22

If organization has no formal risk management processes, the chief audit executive should

Establish risk management processes based on industry norms.
Formulate hypothetical results of possible consequences resulting from risks not being managed.
Inform regulators that the organization is guilty of an infraction.
Formally discuss with the directors their obligations for risk management processes.

Answer 22

Formally discuss with the directors their obligations for risk management processes.

Question 23

The internal audit activity’s quality assurance and improvement program is the responsibility of

External auditors.
The chief audit executive.
The board.
The audit committee.

Answer 23

The chief audit executive.

Question 24

At what minimal required frequency does the chief audit executive report the results of internal assessments in the form of ongoing monitoring to senior management and the board?

Monthly.
Quarterly.
Annually.
Biennially.

Answer 24

Annually.

Question 25

To demonstrate conformance of the internal audit activity with the mandatory guidance of The IIA,

The chief audit executive determines the form and content of the results communicated without seeking input from senior management or the board.
The results of external assessments are communicated upon their completion.
The results of periodic internal assessments are communicated at least monthly.
The results of ongoing monitoring are communicated upon their completion.

Answer 25

The results of external assessments are communicated upon their completion.