UNIT 3: FINANCIAL, ENVIRONMENTAL, AND CONSULTING ENGAGEMENTS

Question 1

According to the Standards, what is the internal audit activity’s responsibility for risk management?

Answer 1

The internal audit activity must evaluate the effectiveness and contribute to the improvement of risk management processes.

Question 2

Management implicitly or explicitly makes assertions about the _____[1]_____, _____[2]_____, and _____[3]_____ of information in financial statements.

Answer 2

Measurement
Presentation
Disclosure

Question 3

What are the key risks affecting the reliability and integrity of financial information?

Answer 3

Overstating revenues
Understating expenses
Applying unreasonable accounting estimates
Applying accounting principles that are no longer in effect

Question 4

List all the accounting cycles.

Answer 4

Sales, Receivables, and Cash Receipts Cycle
Purchases, Payables, and Cash Disbursements Cycle
Production or Conversion Cycle
Financial Capital and Payment Cycle
Personnel and Payroll Cycle
External Financial Reporting Cycle

Question 5

Define fraudulent financial reporting.

Answer 5

Intentional misstatements or omissions to deceive users, such as altering accounting records or documents, misrepresenting or omitting significant information, and misapplying accounting principles.

Question 6

_____[1]_____ oversee(s) the establishment, administration, and assessment of the system of controls.
_____[2]_____ assess(es) controls within their responsibilities.
_____[3]_____ provide(s) assurance about the effectiveness of existing controls.

Answer 6

Senior management
Managers
Internal auditors

Question 7

Internal controls should be evaluated for their ____[1]____ and ____[2]____.

Answer 7

Effectiveness

Efficiency

Question 8

What are the five interrelated components of the COSO framework?

Answer 8

Control activities
Risk assessment
Information and communication
Monitoring
Control environmen

Question 9

What are control activities as defined by the COSO framework?

Answer 9

Policies and procedures applied to ensure that
Management directives are executed and
Actions are taken to address risks.

Question 10

The evaluation of environmental health and safety risk exposures includes

Answer 10

Organizational reporting structures
Likelihood of causing environmental harm, fines, and penalties
Expenditures mandated by governmental agencies
History of injuries and deaths
History of losing customers
Episodes of negative publicity and loss of public image and reputation

Question 11

Define environmental management system.

Answer 11

An organization’s structure of responsibilities and policies, practices, procedures, processes, and resources for protecting the environment and managing environmental issues.

Question 12

What are the seven types of environmental audits according to The IIA Research Foundation?

Answer 12

Compliance audits
Environmental management systems audits
Transactional audits
Treatment, storage, and disposal facility audits
Pollution prevention audits
Environmental liability accrual audits
Product audits

Question 13

What is the proper action if impairments to the internal auditor’s independence or objectivity develop during the consulting engagement?

Answer 13

Immediate disclosure to management.

Question 14

If internal auditors have potential impairments to _____[1]_____ or _____[2]_____ relating to proposed consulting services, _____[3]_____ must be made to the engagement client _____[4]_____ to accepting the engagement.

Answer 14

Independence
Objectivity
Disclosure
Prior

Question 15

Independence and objectivity may be impaired if assurance services are provided within _________ after a formal consulting engagement.

Answer 15

1 year.

Question 16

Internal auditors must exercise due professional care during a consulting engagement by considering the

Answer 16

Needs and expectations of clients, including the nature, timing, and communication of engagement results;
Relative complexity and extent of work needed to achieve the engagement’s objectives; and
Cost of the consulting engagement in relation to potential benefits.

Question 17

List the types of benchmarking.

Answer 17

Competitive
Process (function)
Strategic
Internal
Generic

Question 18

Define due diligence auditing.

Answer 18

A service in which internal auditors and others (external auditors, tax experts, finance professionals, attorneys, etc.) determine the business justification for a major transaction (business combination, joint venture, divestiture, etc.) and whether that justification is valid.

Question 19

To do 1 order guidaNCE

Answer 19

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